Document:

EXHIBIT 10.2

 

EXECUTION VERSION

 

 

 

RECOVERY PROPERTY SERVICING AGREEMENT

 

 

between

 

 

PG&E ENERGY RECOVERY FUNDING LLC

 

 

Issuer

 

 

and

 

 

PACIFIC GAS AND ELECTRIC COMPANY

 

 

Servicer

 

 

Dated as of February 10, 2005

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I                                               DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  Definitions

  	
   

  
	
  SECTION 1.02.

  	
  Other Definitional
  Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II                                           APPOINTMENT
  AND AUTHORIZATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  Appointment
  of Servicer; Acceptance of Appointment

  	
   

  
	
  SECTION 2.02.

  	
  Authorization

  	
   

  
	
  SECTION 2.03.

  	
  Dominion
  and Control Over the Recovery Property

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III                                       BILLING
  SERVICES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  Duties of Servicer

  	
   

  
	
  SECTION 3.02.

  	
  Servicing and
  Maintenance Standards

  	
   

  
	
  SECTION 3.03.

  	
  Certificate of Compliance

  	
   

  
	
  SECTION 3.04.

  	
  Annual
  Report by Independent Public Accountants

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV                                       SERVICES
  RELATED TO TRUE-UP ADJUSTMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  Periodic True-Up
  Adjustments

  	
   

  
	
  SECTION 4.02.

  	
  Limitation of Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V                                           THE
  RECOVERY PROPERTY

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  Custody of
  Recovery Property Records

  	
   

  
	
  SECTION 5.02.

  	
  Duties of Servicer as
  Custodian

  	
   

  
	
  SECTION 5.03.

  	
  Effective Period and
  Termination

  	
   

  
	
  SECTION 5.04.

  	
  General
  Indemnification of Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI                                       THE
  SERVICER

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  Representations
  and Warranties of Servicer

  	
   

  
	
  SECTION 6.02.

  	
  Indemnities
  of Servicer; Release of Claims

  	
   

  
	
  SECTION 6.03.

  	
  Merger
  or Consolidation of, or Assumption of the Obligations of, Servicer

  	
   

  
	
  SECTION 6.04.

  	
  Limitation
  on Liability of Servicer and Others

  	
   

  
	
  SECTION 6.05.

  	
  Pacific
  Gas and Electric Company Not to Resign as Servicer

  	
   

  
	
  SECTION 6.06.

  	
  Servicing Compensation.

  	
   

  
	
  SECTION 6.07.

  	
  Compliance With
  Applicable Law

  	
   

  
	
  SECTION 6.08.

  	
  Access
  to Certain Records and Information Regarding Recovery Property

  	
   

  
	
  SECTION 6.09.

  	
  Appointments

  	
   

  
	
  SECTION 6.10.

  	
  No Servicer Advances

  	
   

  
	
  SECTION 6.11.

  	
  Remittances

  	
   

  

 

i

 

	
  ARTICLE VII                                   DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
  Servicer
  Default

  	
   

  
	
  SECTION 7.02.

  	
  Appointment
  of Successor

  	
   

  
	
  SECTION 7.03.

  	
  Waiver
  of Past Defaults

  	
   

  
	
  SECTION 7.04.

  	
  Notice
  of Servicer Default

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII                               MISCELLANEOUS
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01.

  	
  Amendment

  	
   

  
	
  SECTION 8.02.

  	
  Accounts
  and Records

  	
   

  
	
  SECTION 8.03.

  	
  Notices

  	
   

  
	
  SECTION 8.04.

  	
  Assignment

  	
   

  
	
  SECTION 8.05.

  	
  Limitations
  on Rights of Others

  	
   

  
	
  SECTION 8.06.

  	
  Severability

  	
   

  
	
  SECTION 8.07.

  	
  Separate
  Counterparts

  	
   

  
	
  SECTION 8.08.

  	
  Headings

  	
   

  
	
  SECTION 8.09.

  	
  Governing
  Law

  	
   

  
	
  SECTION 8.10.

  	
  Assignment
  to Trustee

  	
   

  
	
  SECTION 8.11.

  	
  Nonpetition
  Covenants

  	
   

  
	
  SECTION 8.12.

  	
  CPUC
  Consents

  	
   

  

 

ii

 

 

	
  Exhibit A

  	
  Annual Certificate of Compliance

  
	
   

  	
   

  
	
  Exhibit B

  	
  Form of Quarterly Servicer’s Certificate

  
	
   

  	
   

  
	
  Exhibit C

  	
  Form of Monthly Servicer’s Certificate

  
	
   

  	
   

  
	
  Exhibit D

  	
  Form of Daily Servicer’s Certificate

  
	
   

  	
   

  
	
  Exhibit E

  	
  Form of Annual DRC Charge True-Up Mechanism
  Advice Filing

  
	
   

  	
   

  
	
  Exhibit F

  	
  Form of Anniversary DRC Charge True-Up
  Mechanism Advice Filing

  
	
   

  	
   

  
	
  Exhibit G

  	
  Expected
  Amortization Schedule

  
	
   

  	
   

  
	
  Annex I

  	
  Servicing Procedures

  
	
   

  
	
   

  	
  Attachment A
  to Annex I

  	
  Calculation of
  Aggregate Monthly Remittance Amount

  
	
   

  	
   

  	
   

  
	
   

  	
  Attachment B to
  Annex I

  	
  Calculation of
  Daily Remittance Amounts for First Six Collection Periods

  
				

 

iii

 

RECOVERY PROPERTY SERVICING AGREEMENT dated as of February 10,
2005, between PG&E ENERGY RECOVERY FUNDING LLC, a Delaware limited
liability company (the “Issuer”), and PACIFIC GAS AND ELECTRIC COMPANY, a
California corporation, as the servicer of the Recovery Property (together with
each successor to Pacific Gas and Electric Company (in the same capacity)
pursuant to Section 6.03 or Section 7.02, the “Servicer”).

 

RECITALS

 

A.                                   Pursuant
to the Statute and the Financing Order, the Seller and the Issuer are
concurrently entering into the Sale Agreement pursuant to which the Seller is
selling to the Issuer the Recovery Property created pursuant to the PU Code,
the Financing Order and the Issuance Advice Letter described in such Sale
Agreement, and the Seller may sell other Recovery Property to the Issuer
pursuant to Subsequent Sale Agreements.

 

B.                                     In
connection with its ownership of the Recovery Property and in order to collect
the DRC Charges associated with each Series of Bonds, as defined herein, the
Issuer desires to engage the Servicer to carry out the functions described
herein.  The Servicer currently performs
similar functions for itself with respect to its own charges to its customers
and may in the future perform for others. 
In addition, the Issuer desires to engage the Servicer to obtain True-Up
Adjustments from the CPUC.  The Servicer
desires to perform all of these activities.

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the parties hereto agree as follows:

 

 

ARTICLE I

Definitions

 

SECTION 1.01.                 Definitions. 
Whenever used in this Agreement, the following words and phrases shall
have the following meanings:

 

“Actual
DRC Payments” means the actual DRC Payments received by the Servicer
attributable to a particular Billing Period, which are determined by adjusting
Estimated DRC Payments for such Billing Period as specified in Annex I.

 

“Advice
Letter” means any filing made with the CPUC by the Servicer with respect to the
DRC Charges or any True-Up Adjustment in the form of an advice letter,
including an Issuance Advice Letter, a Routine Annual True-Up Mechanism Advice
Letter, an Anniversary True-Up Mechanism Advice Letter, a Routine Quarterly
True-Up Mechanism Advice Letter or a Non-Routine True-Up Mechanism Advice
Letter.

 

“Aggregate
Monthly Remittance Amount”, with respect to each Series of Bonds, has the
meaning set forth in Annex I hereto.

 

“Agreement”
means this Recovery Property Servicing Agreement, together with all Exhibits,
Annexes and Attachments hereto, as the same may be amended and supplemented
from time to time.

 

“Anniversary
True-Up Mechanism Advice Letter” means an Advice Letter filed with the CPUC at
least fifteen days prior to the Financing Order Anniversary Date in respect of
a True-Up Adjustment, substantially in the form of Exhibit F
hereto.  Any True-Up Adjustment required
as a result of the Anniversary True-Up Mechanism Advice Letter will become
effective on the date specified by the CPUC in accordance with the Financing
Order.

 

“Annual
Accountant’s Report” has the meaning set forth in Section 3.04.

 

2

 

“Annual
Adjustment Filing Date” means each December 15, from and including December 15,
2005 to and including the last December 15 preceding the Retirement Date; provided, however, that if any such day is not
a Servicer Business Day, “Annual Adjustment Filing Date” shall mean the
Servicer Business Day immediately preceding such day.

 

“Applicable
ESP” means, with respect to each Consumer, the ESP, if any, providing “direct
access” service to that Consumer.

 

“Billing
Period” means a calendar month.

 

“Bills”
means each of the regular monthly bills, the summary bills, the opening bills
and the closing bills issued to Consumers or ESPs by PG&E on its own behalf
and in its capacity as Servicer.

 

“Bonds”
means each Series of energy recovery bonds issued by the Issuer pursuant to an
Indenture, unless such Indenture specifies such energy recovery bonds are subject
to a different servicing agreement.

 

“Capital
Subaccount” has the meaning set forth in the applicable Indenture.

 

“Certificate
of Compliance” has the meaning set forth in Section 3.03.

 

“Closing
Date” means February 10, 2005.

 

“Collection
Period” means the calendar month immediately preceding the respective Monthly
Remittance Date.

 

“Consolidated
ESP Billing” has the meaning set forth in Annex I hereto.

 

“Consumers”
has the meaning set forth in Section 1.01 of the Sale Agreement.

 

“CPUC”
means the California Public Utilities Commission or any successor governmental
agency that has regulatory authority over the True-Up Adjustments contemplated
by the Statute.

 

3

 

“CPUC
Regulations” means all regulations, rules, tariffs, orders and laws applicable
to public utilities or ESPs, as the case may be, and promulgated by, enforced
by or otherwise within the jurisdiction of the CPUC.

 

“Daily
Remittance” has the meaning set forth in Section 6.11(d).

 

“Daily
Remittance Date” means the date of each Daily Remittance.

 

“Daily
Servicer’s Certificate” means a certificate, substantially in the form of Exhibit D
hereto, completed and executed by a Responsible Officer pursuant to Section 3.01(b)(ii).

 

“DRC
Charges” means, with respect to each Series of Bonds, the charges for fixed
recovery amounts authorized to be billed to Consumers in respect of Recovery
Property pursuant to the Financing Order and the Issuance Advice Letter
relating to such Series of Bonds, as calculated pursuant to the applicable
Issuance Advice Letter and each true-up mechanism advice letter filed with the
CPUC pursuant to the Financing Order.

 

“DRC
Collections” means DRC Payments that are remitted by the Servicer to the
applicable Collection Account.

 

“DRC
Effective Date” means, with respect to each Series of Bonds, the date on which
the initial DRC Charge goes into effect pursuant to the terms of the Financing
Order and the Issuance Advice Letter.

 

“DRC
End Date” means, with respect to each Series of Bonds, depending on the context
in which used, either:  (i) the date on
which specific DRC Charges in respect of such Series of Bonds end because such
DRC Charges have been replaced with revised DRC Charges or (ii) the DRC
Termination Date.

 

4

 

“DRC
Payments” means the payments made by Consumers, or by ESPs on behalf of
Consumers, based on the DRC Charges. 
Notwithstanding any other provision of this Agreement, DRC Payments
shall not include Retained Collections.

 

“DRC
Start Date” means, with respect to each Series of Bonds, depending on the
context in which used, either:  (i) the
DRC Effective Date or (ii) the date on which specific revised DRC Charges go
into effect to replace previously existing DRC Charges.

 

“DRC
Termination Date” means, with respect to each Series of Bonds, the date on
which the usage of electricity will cease to give rise to DRC Charges in
respect of such Series of Bonds pursuant to the terms of the Financing Order.

 

“ESP”
means an alternative energy service provider who has entered into an ESP
Service Agreement with PG&E.

 

“ESP
Service Agreement” means an agreement between an ESP and PG&E for the
provision of “direct access” service to customers in accordance with CPUC
Decision 97-10-087 and subsequent decisions.

 

“Estimated
DRC Payments” means the sum of the amounts remitted to the applicable Trustee
as DRC Payments with respect to a Billing Period during the six months
following such Billing Period based on the Monthly Collections Curve.

 

“Excess
Remittance” means, with respect to each Series of Bonds, the amount, if any,
calculated for a particular Monthly Remittance Date, by which all Estimated DRC
Payments remitted to the Collection Account on and prior to such Monthly
Remittance Date with respect to the DRC Charges billed to Consumers during the
sixth preceding Billing Period exceed Actual DRC Payments received by the
Servicer attributable to such Billing Period.

 

5

 

“Expected
Amortization Schedule” means, with respect to each Series of Bonds, the
Expected Amortization Schedule set forth on Exhibit G hereto, as
the same may be amended from time to time pursuant to Section 4.01(a).

 

“Financing
Order” means the order of the CPUC, Decision 04-11-015, issued on November 19,
2004, which became effective on November 29, 2004.

 

“Financing
Order Anniversary Date” means November 19 of each year.

 

“Indenture”
means each indenture, between the Issuer and the applicable Trustee, as the
same may be amended and supplemented from time to time pursuant to which Bonds
are issued.

 

“Initial
Recovery Property” means the Recovery Property as defined in Section 1.01
of the Sale Agreement.

 

“Insolvency
Event” means, with respect to a specified Person, (a) the filing of a decree or
order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case
under any applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person’s affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (b) the commencement by such
Person of a voluntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
such Person to the entry of an order for relief in an involuntary case under
any such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial

 

6

 

part of its property, or the
making by such Person of any general assignment for the benefit of creditors,
or the failure by such Person generally to pay its debts as such debts become
due.

 

“Issuance
Advice Letter” means, with respect to each Series of Bonds, the Advice Letter
filed with the CPUC in connection with and immediately prior to the issuance of
that Series of Bonds.  The first Issuance
Advice Letter will establish the initial DRC Charges in respect of the first
Series of Bonds, and each subsequent Issuance Advice Letter will specify the
initial DRC Charges in respect of additional Series of Bonds.

 

“Issuer”
has the meaning set forth in the first paragraph hereof.

 

“Lien”
means a security interest, lien, charge, pledge, equity or encumbrance of any
kind.

 

“Losses”
has the meaning assigned to that term in Section 5.04.

 

“Monthly
Collections Curve” has the meaning set forth on Attachment A to Annex I hereto.

 

“Monthly
Remittance Date” means the twentieth day of each calendar month or, if such day
is not a Business Day, the next succeeding Business Day, commencing in April,
2005.

 

“Monthly
Servicer’s Certificate” means a certificate, substantially in the form of Exhibit C
hereto, completed and executed by a Responsible Officer pursuant to Section 3.01(b)(i).

 

“Non-Routine
True-Up Adjustment” has the meaning set forth in Section 4.01(c)(i).

 

“Non-Routine
True-Up Mechanism Advice Letter” means an Advice
Letter filed with the CPUC in accordance with the Financing Order with respect
to any Non-Routine True-Up

 

7

 

Adjustment, pursuant to which the related Non-Routine
True-Up Adjustment generally will become effective at the beginning of the
first Quarter that is at least 90 days after filing.

 

“Officer’s
Certificate” means a certificate signed by a Responsible Officer.

 

“Opinion
of Counsel” means one or more written opinions of counsel who may be employees
of or counsel to the party providing such opinion(s) of counsel, which counsel
shall be reasonably acceptable to the party receiving such opinion(s) of
counsel.

 

“Overcollateralization
Subaccount” has the meaning set forth in the applicable Indenture.

 

“Payment
Date” means, with respect to any Series or Class, each March 25, June 25,
September 25 and December 25 of each year, provided that if any such
date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date.

 

“PG&E”
means Pacific Gas and Electric Company.

 

“Principal
Balance” means, as of any Payment Date, the sum of the outstanding principal
amount of the applicable Class or Series of Bonds.

 

“Projected
Principal Balance” means, with respect to each Series of Bonds, as of any
Payment Date, the sum of the projected outstanding principal amount of such
Series of Bonds for such Payment Date set forth in the Expected Amortization
Schedule.

 

“PU
Code” means the California Public Utilities Code, as amended from time to time.

 

“Quarter”
means each calendar quarter, specifically:

 

January 1
to and including March 31;

 

April 1
to and including June 30;

 

July 1
to and including September 30; and

 

8

 

October 1 to and including December 31.

 

“Quarterly
Servicer’s Certificate” means a certificate, substantially in the form of Exhibit
B hereto, completed and executed by a Responsible Officer pursuant to Section 4.01(d)(ii).

 

“Recovery
Property” means the Initial Recovery Property and, from and after the
applicable Subsequent Sale Date therefor, any Subsequent Recovery Property.

 

“Recovery
Property Records” has the meaning assigned to that term in Section 5.01.

 

“Remittance
Shortfall” means, with respect to each Series of Bonds, the amount, if any,
calculated for a particular Monthly Remittance Date, by which Actual DRC
Payments received by the Servicer attributable to DRC Charges billed to
Consumers during the sixth preceding Billing Period exceed all Estimated DRC
Payments remitted to the Collection Account on and prior to such Monthly
Remittance Date with respect to such Billing Period.

 

“Required
Capital Level” means, with respect to each Series of Bonds, 0.5 percent of the
initial principal amount of such Series of Bonds.

 

“Required
Overcollateralization Level” means, with respect to each Series of Bonds, as of
any Payment Date, the amount required to be on deposit in the
Overcollateralization Subaccount for such Series of Bonds as specified in the
related Indenture.

 

“Reserve
Subaccount” has the meaning set forth in the applicable Indenture.

 

“Responsible
Officer” means the chairman of the board, the chief executive officer, the
president, the vice chairman of the board, any senior vice president, any vice
president, the treasurer, any assistant treasurer, the secretary, any assistant
secretary or the controller of the Servicer.

 

9

 

“Retained
Collections” means payments based on the DRC Charges that the Financing Order,
a Tariff, an order or decision of the CPUC, or CPUC Regulations provide are to
be retained by the Seller or the Servicer and not remitted to the Issuer.

 

“Retirement
Date” means, with respect to any Series of Bonds, the later of the day on which
the final distribution is made to the Trustee in respect of the last
outstanding Bond of that Series and the day on which all amounts required to be
paid by DRC Charges have been paid in respect of that Series.

 

“Routine
Annual True-Up Mechanism Advice Letter” means an Advice Letter filed with the
CPUC at least fifteen days prior to the end of each calendar year in respect of
an annual True-Up Adjustment, substantially in the form of Exhibit E
hereto.  The Routine Annual True-Up
Mechanism Advice Letter will become effective on the first calendar day of the
next calendar year.

 

“Routine
Quarterly True-Up Mechanism Advice Letter” means an Advice Letter filed with
the CPUC at least fifteen days prior to the end of any of the first three
Quarters of each calendar year in respect of a quarterly True-Up
Adjustment.  The Routine Quarterly
True-Up Mechanism Advice Letter will become effective on the first calendar day
of the next Quarter.

 

“Sale
Agreement” means the Recovery Property Purchase and Sale Agreement, dated as of
the date hereof, between the Seller and the Issuer, as amended and supplemented
from time to time.

 

“SEC”
means the Securities and Exchange Commission or any successor thereto.

 

“Seller”
means Pacific Gas and Electric Company and its successors in interest to the
extent permitted under the Sale Agreement or a Subsequent Sale Agreement.

 

10

 

“Series”
means all Bonds issued on the same Series Issuance Date pursuant to the same
Indenture.

 

“Series
Issuance Date” means the date on which a Series of Bonds is issued.  The Series Issuance Date for the Series
2005-1 Bonds is February 10, 2005.

 

“Servicer”
has the meaning set forth in the first paragraph hereof.

 

“Servicer
Business Day” means any day other than a Saturday, a Sunday or a day (i) on
which banking institutions or trust companies in New York, New York or San
Francisco, California, are authorized or obligated by law, regulation or
executive order to remain closed or (ii) on which the Servicer’s offices in
California are closed for business.

 

“Servicer
Default” means an event specified in Section 7.01.

 

“Servicing
Fee” means, with respect to each Series of Bonds, the fee payable on each
Payment Date to the Servicer for services rendered during the period from, but
not including, the preceding Payment Date to and including the current Payment
Date, determined pursuant to Section 6.06.

 

“Statute”
means Chapter 46, California Statutes of 2004, codified at Public Utilities
Code Section 848 et seq., as further amended from time to time.

 

“Subsequent
Sale Agreement” has the meaning assigned to that term in the definition of
Subsequent Recovery Property.

 

“Subsequent
Sale Date” means any date on which Subsequent Recovery Property is sold to the
Issuer pursuant to a Subsequent Sale Agreement.

 

“Subsequent
Recovery Property” means any recovery property (as defined in Section 848
of the PU Code) created under the PU Code and the Financing Order and
specifically described in the related Issuance Advice Letter and sold to the
Issuer by the Seller 

 

11

 

pursuant
to an agreement substantially similar to the Sale Agreement (a “Subsequent Sale
Agreement”).

 

“Tariff”
means each rate tariff filed with the CPUC pursuant to the Financing Order and the
Statute relating to the DRC Charges for each Series of Bonds.

 

“Termination
Notice” has the meaning assigned to that term in Section 7.01.

 

“True-Up
Adjustment” means each adjustment to the DRC Charges made pursuant to the terms
of the Financing Order and in accordance with Section 4.01 hereof.

 

“Trustee”
means each Person acting as trustee under an Indenture.

 

“Trust
Officer” means any officer assigned to the Corporate Trust Office, including
any managing director, vice president, assistant vice president, assistant
treasurer, assistant secretary or any other officer of the related Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
the relevant Indenture, 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.

 

SECTION 1.02.                 Other Definitional Provisions.

 

(a)                                  Capitalized
terms used herein and not otherwise defined herein have the meanings assigned
to them in the applicable Indenture.

 

(b)                                 All
terms defined in this Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.

 

12

 

(c)                                  The
words “hereof,” “herein,” “hereunder” and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Exhibit, Annex and Attachment
references contained in this Agreement are references to Sections, Exhibits,
Annexes and Attachments in or to this Agreement unless otherwise specified; and
the term “including” shall mean “including without limitation.”

 

(d)                                 The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter forms of such terms.

 

(e)                                  Each
reference herein to the Sale Agreement, an Indenture, or any other Basic
Document refers to such agreement as in effect on the Closing Date unless
otherwise agreed to by the Servicer and the Issuer.

 

(f)                                    Any
term used herein that is defined in the Statute and not otherwise defined
herein shall have the meaning set forth in the Statute.

 

ARTICLE II

Appointment and Authorization

 

SECTION 2.01.                 Appointment of Servicer; Acceptance of Appointment.  Subject to Section 6.05 and Article VII,
the Issuer hereby appoints the Servicer, and the Servicer hereby accepts such
appointment, to perform the Servicer’s obligations pursuant to this Agreement
in accordance with the terms of this Agreement and applicable law.  This appointment and the Servicer’s acceptance
thereof may not be revoked except in accordance with the express terms of this
Agreement.

 

SECTION 2.02.                 Authorization.  Without
limiting the generality of Section 2.01, the Servicer or its designee is
hereby authorized and empowered, unless such power is

 

13

 

revoked on account of the occurrence of a Servicer
Default pursuant to Section 7.01, (i) to execute and deliver, on behalf of
the Issuer, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments,
with respect to the Recovery Property and, after the delinquency of any
Recovery Property and to the extent permitted under and in compliance with
applicable law and regulations, to commence collection proceedings with respect
to such Recovery Property, and (ii) to make any filings, reports, notices, and
applications with, to seek any consents or authorizations from, and to
participate in any proceedings before, the CPUC or any other governmental
authority to the extent relating to the Recovery Property. The Issuer and the
Trustee upon reasonable request therefor shall furnish the Servicer with any
documents in their possession necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder

 

SECTION 2.03.                 Dominion
and Control Over the Recovery Property.  Notwithstanding any other provision herein,
the Servicer and the Issuer agree that the Issuer shall have dominion and
control over the Recovery Property, and the Servicer, in accordance with the
terms hereof, is acting solely as the Servicer with respect to the Recovery
Property and the Recovery Property Records. 
The Servicer hereby agrees that it shall not take any action that is not
authorized by this Agreement, that is not consistent with its customary
procedures and practices, or that shall impair the rights of the Issuer in the
Recovery Property, in each case unless such action is required by law or court
or regulatory order.

 

ARTICLE III

Billing Services

 

SECTION 3.01.                 Duties of Servicer. 
The Servicer shall have the following duties:

 

14

 

(a)                                  Duties
of Servicer Generally.  The Servicer’s
duties in general shall include management, servicing and administration of the
Recovery Property; obtaining meter reads, calculating electric usage, billing,
collections and posting of all payments in respect of the Recovery Property;
responding to inquiries by Consumers, the CPUC, or any federal, local or other
state governmental authorities with respect to the Recovery Property;
delivering Bills to Consumers and ESPs, processing and depositing collections
and making periodic remittances pursuant to the Financing Order and each
Tariff; furnishing periodic reports to the Issuer, the Trustee and the Rating
Agencies; and taking action in connection with True-Up Adjustments as set forth
herein.  Certain of the duties set forth
above may be performed by ESPs pursuant to ESP Service Agreements if such ESPs
satisfy the creditworthiness requirements as set forth in Pacific Gas and
Electric Company’s Electric Rule 22.P., “Credit
Requirements.”  Anything to the contrary
notwithstanding, the duties of the Servicer set forth in this Agreement shall
be qualified in their entirety by any CPUC Regulations as in effect at the time
such duties are to be performed.  Without
limiting the generality of this Section 3.01(a), in furtherance of the
foregoing, the Servicer hereby agrees that it shall also have, and shall comply
with, the duties and responsibilities relating to data acquisition, electric
usage and bill calculation, billing, customer service functions, collections,
payment processing and remittance set forth in Annex I hereto.

 

(b)                                 Reporting
Functions.

 

(i)                                     Monthly
Servicer’s Certificate.  With respect
to each Series of Bonds, on or before each Monthly Remittance Date, the
Servicer shall prepare and deliver to the Issuer, the Trustee and the Rating
Agencies a written report substantially in the form of

 

15

 

Exhibit C
hereto setting forth certain information relating to DRC Collections during the
Collection Period preceding such Monthly Remittance Date.

 

(ii)                                  Daily
Servicer’s Certificate.  With respect
to each Series of Bonds, if the Servicer is required to remit DRC Payments on a
daily basis, the Servicer shall prepare and deliver to the Issuer, the Trustee
and the Rating Agencies a written report substantially in the form of
Exhibit D hereto with respect to each daily remittance, in addition to the
monthly reports.

 

(iii)                               Other
Information.  With respect to each
Series of Bonds, upon the reasonable request of the Issuer, the Trustee, or any
Rating Agency, the Servicer shall provide to such Issuer, Trustee, or Rating
Agency, as the case may be, any public financial information in respect of the
Servicer, or any material information regarding the applicable Recovery
Property to the extent it is reasonably available to the Servicer, as may be
reasonably necessary and permitted by law for the Issuer, the Trustee or the
Rating Agency to monitor the performance by the Servicer hereunder.  In addition, so long as any of the Bonds of
any Series are outstanding, the Servicer shall provide the Issuer and the
applicable Trustee, within a reasonable time after written request therefor,
any information available to the Servicer or reasonably obtainable by it that
is necessary to calculate the applicable DRC Charges.

 

(iv)                              Preparation
of Reports to be Filed With the SEC.  The Servicer shall prepare any reports
required to be filed by the Issuer under the securities laws, including but not
limited to a copy of each Quarterly Servicer’s Certificate described in Section 4.01(d)(ii).

 

16

 

SECTION 3.02.                 Servicing and Maintenance Standards.  The Servicer shall (a)  manage, service, administer and make
collections in respect of the Recovery Property with reasonable care and in
material compliance with applicable law, including all applicable CPUC Regulations
and guidelines, using the same degree of care and diligence that the Servicer
exercises with respect to billing and collection activities for its own account
and, if applicable, for others; (b) 
follow customary standards, policies and procedures for the industry in
performing its duties as Servicer; (c) 
use all reasonable efforts, consistent with its customary servicing
procedures, to enforce the rights of the Issuer and the Trustee in respect of
the Recovery Property; and (d)  comply in
all material respects with all laws and regulations applicable to and binding
on it relating to the Recovery Property. 
The Servicer shall follow such customary and usual practices and
procedures as it shall deem necessary or advisable in its servicing of all or
any portion of the Recovery Property, which, in the Servicer’s judgment, may
include the taking of legal action.

 

SECTION 3.03.                 Certificate of Compliance.  With respect to each Series of Bonds, the
Servicer shall deliver to the Issuer, the Trustee, the CPUC and the Rating
Agencies on or before September 30 of each year, commencing September 30,
2005 to and including the September 30 succeeding the Retirement Date, an
Officer’s Certificate substantially in the form of Exhibit A hereto (a “Certificate
of Compliance”), stating that:  (i) a
review of the activities of the Servicer during the twelve months ended the
preceding June 30 (or, in the case of the first Certificate of Compliance
to be delivered on or before September 30, 2005, the period of time from the
Closing Date until June 30, 2005) and of its performance under this
Agreement has been made under such officer’s supervision, and (ii) to the best
of such officer’s knowledge, based on such review, the Servicer has fulfilled
all of its obligations in all material respects under

 

17

 

this Agreement throughout such twelve months (or, in
the case of the Certificate of Compliance to be delivered on or before September 30,
2005, the period of time from the Closing Date until June 30, 2005), or,
if there has been a default in the fulfillment of any such material obligation,
specifying each such material default known to such officer and the nature and
status thereof.

 

SECTION 3.04.                 Annual Report by Independent Public Accountants.

 

(a)                                  With
respect to each Series of Bonds, the Servicer shall cause a firm of independent
certified public accountants (which may provide other services to the Servicer
or the Seller) to prepare, and the Servicer shall deliver to the Issuer, the
Trustee, the CPUC and the Rating Agencies, a report addressed to the Servicer
(the “Annual Accountant’s Report”), which may be included as part of the
Servicer’s customary auditing activities, for the information and use of the
Issuer and the Trustee, on or before September 30 of each year, beginning September 30,
2005 to and including the September 30 succeeding the Retirement Date, to
the effect that such firm has performed certain procedures in connection with
the Servicer’s compliance with its obligations under this Agreement during the
preceding twelve months ended June 30 (or, in the case of the first Annual
Accountant’s Report to be delivered on or before September 30, 2005, the
period of time from the Closing Date until June 30, 2005), identifying the
results of such procedures and including any exceptions noted.  In the event such accounting firm requires
the Trustee to agree or consent to the procedures performed by such firm, the
Issuer shall direct the Trustee in writing to so agree; it being understood and
agreed that the Trustee will deliver such letter of agreement or consent in
conclusive reliance upon the direction of the Issuer, and the Trustee will not
make any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of the sufficiency, validity or correctness
of such procedures.

 

18

 

(b)                                 The
Annual Accountant’s Report shall also indicate that the accounting firm
providing such report is independent of the Servicer within the meaning of the
Code of Professional Ethics of the American Institute of Certified Public
Accountants.

 

ARTICLE IV

Services Related to True-Up Adjustments

 

SECTION 4.01.                 Periodic True-Up Adjustments.  With respect to each Series of Bonds, from
time to time, until the Retirement Date, the Servicer shall identify the need
for True-Up Adjustments and shall take all reasonable action to obtain and
implement such True-Up Adjustments, all in accordance with the following:

 

(a)                                  Expected
Amortization Schedule.  The initial
Expected Amortization Schedule for the initial Series of Bonds is attached
hereto as Exhibit G.  In
connection with the issuance by the Issuer of any additional Series of Bonds
after the Closing Date, the Servicer, on or prior to the Series Issuance Date
therefor, shall revise Exhibit G to add the Expected Amortization Schedule relating
to each new Series of Bonds setting forth, as of each Payment Date through the
scheduled retirement of that Series of Bonds, the aggregate principal amounts
of the Bonds of that Series, expected to be outstanding on such Payment Date.

 

(b)                                 Routine
True-Up Adjustments and Yearly Filings.

 

(i)                                     Routine
Yearly True-Up Adjustments and Filings.

 

(1)                                  Each
year on or immediately before the Annual Adjustment Filing Date with respect to
each Series of Bonds, the Servicer shall: 
(A) estimate collections through the December 31 immediately
following such Annual Adjustment Filing Date and through December 31 of
the year following the year of such Annual Adjustment Filing Date; (B) update
the

 

19

 

assumptions
underlying the DRC Charges, including electric usage volume projected to be
sold to Consumers (exclusive of usage relating to any Retained Collections),
the rate of delinquencies and write-offs, the amount of any Retained
Collections that will be withheld or become eligible to be remitted to the
Trustee during the period, to the extent known, estimated expenses and fees of
the Issuer, to the extent not fixed, and the Monthly Collections Curve;
(C) determine the revised DRC Charges that, together with any funds on
deposit in the Reserve Subaccount, would: 
(1) cause all accrued and unpaid interest to be paid in full and
the Principal Balance to equal the Projected Principal Balance, (2) cause the
balance in the Overcollateralization Subaccount to equal the Required
Overcollateralization Level, (3) restore the balance in the Capital Subaccount
to the Required Capital Level and (4) cause all other fees, expenses and
indemnities of the Issuer to be paid, in each case within twelve months after
such revised DRC Charges go into effect (and with respect to any True-Up
Adjustments occurring after the last Scheduled Maturity Date for that Series,
determine the revised DRC Charges that would be sufficient to retire the unpaid
Principal Balance of that Series within the earlier of (x) the end of the then
current calendar year and (y) the last Final Legal Maturity Date for that
Series); (D) file a Routine Annual True-Up Mechanism Advice Letter with the
CPUC, substantially in the form attached hereto as Exhibit E, to notify
the CPUC of the DRC Charges for the coming year; and (E) take all reasonable
actions and make

 

20

 

all reasonable
efforts to secure such True-Up Adjustment and to enforce the provisions of the
Statute which obligate the CPUC to approve rates at levels sufficient to
recover the DRC Payments in accordance with the Expected Amortization Schedule.

 

(2)                                  Each
year on or immediately before November 4 of such year, which is the date
that is fifteen days before the Financing Order Anniversary Date, commencing on
November 4, 2005 (or if such date is not a Servicer Business Day, on the
Servicer Business Day immediately preceding such date), the Servicer
shall:  (A) estimate collections through
the end of the Quarter in which the Financing Order Anniversary Date occurs;
(B) if required by the Servicer in its judgment or found to be necessary by the
CPUC, update the assumptions underlying the DRC Charges, including electric
usage volume projected to be sold to Consumers (exclusive of usage relating to
Retained Collections), the rate of delinquencies and write-offs, the amount of
any Retained Collections that will be withheld or will become eligible to be
remitted to the Trustee during the period, to the extent known, and estimated
expenses and fees of the Issuer to the extent not fixed; (C) if required by the
Servicer in its judgment or found to be necessary by the CPUC, determine the
revised DRC Charges that, together with any funds on deposit in the Reserve
Subaccount, would: (1) cause all accrued and unpaid interest to be paid in
full and the Principal Balance to equal the Projected Principal Balance, (2)
cause the balance in the Overcollateralization Subaccount to equal the

 

21

 

Required
Overcollateralization Level, (3) restore the balance in the Capital Subaccount
to the Required Capital Level and (4) cause all other fees, expenses and
indemnities of the Issuer to be paid, in each case within twelve months after
such revised DRC Charges go into effect (and with respect to any True-Up
Adjustments occurring after the last Scheduled Maturity Date for that Series,
determine the revised DRC Charges that would be sufficient to retire the unpaid
Principal Balance of that Series within the earlier of (x) the end of the then
current calendar year and (y) the last Final Legal Maturity Date for that
Series); (D) file an Anniversary True-Up Mechanism Advice Letter with the CPUC,
substantially in the form attached hereto as Exhibit F; and (E) take all
reasonable actions and make all reasonable efforts to secure the resulting
True-Up Adjustment (if such an adjustment is sought by the Servicer or found to
be necessary by the CPUC) and to enforce the provisions of the Statute which
obligate the CPUC to approve rates at levels sufficient to recover the DRC
Payments in accordance with the Expected Amortization Schedule.

 

(3)                                  In
the case of a True-Up Adjustment pursuant to a Routine Annual True-Up Mechanism
Advice Letter, the Servicer shall implement the revised DRC Charges, if any, as
of the first day of the following calendar year.

 

(4)                                  In
the case of a True-Up Adjustment required by the Servicer in its judgment or
found to be necessary by the CPUC pursuant to

 

22

 

an
Anniversary True-Up Mechanism Advice Letter, the Servicer shall implement the
revised DRC Charges, if any, within 90 days of the anniversary of the issuance
of the Financing Order.

 

(ii)                                  Routine
Quarterly True-Up Adjustments.

 

(1)                                  The
Servicer may file Routine Quarterly True-Up Mechanism Advice Letters.  Except as provided in Sections 4.01(b)(ii)(2) 4.01(b)(ii)(3) and 4.01(b)(ii)(4), the Servicer
shall not be obligated to file Routine Quarterly True-Up Mechanism Advice
Letters.

 

(2)                                  If
the Issuance Advice Letter with respect to that Series of Bonds provides that
the Servicer will file Routine Quarterly True-Up Mechanism Advice Letters, then
the Servicer shall make such filings in accordance with the Financing Order.

 

(3)                                  With
respect to the Series 2005-1 Bonds, the Servicer shall file a Routine Quarterly
True-Up Mechanism Advice Letter no later than fifteen days before the end of
any of the first three Quarters of each calendar year if the outstanding
principal balance of the Series 2005-1 Bonds as of the Payment Date occurring
in that Quarter, after giving effect to payments made on such Payment Date, is
projected to be 5% or more greater than the scheduled principal balance
specified in the Expected Amortization Schedule for such Payment Date.

 

(4)                                  If
the principal amount of that Series of Bonds remains outstanding after the last
Scheduled Maturity Date for such Series, the Servicer shall file Routine
Quarterly True-Up Mechanism Advice Letters

 

23

 

until
all Classes of Bonds of such Series and other amounts to be paid from DRC
Charges relating to such Series have been paid in full.  Each such Routine Quarterly True-Up Mechanism
Advice Letter shall request adjustments to the DRC Charges projected to pay all
amounts required to be paid by such DRC Charges by the earlier of the end of
the then current calendar year or the latest Final Legal Maturity Date for that
Series of Bonds.

 

(c)                                  Non-Routine
True-Up Adjustments.

 

(i)                                     Whenever
the Servicer determines that the existing model for calculating the DRC Charges
should be amended or revised, the Servicer shall file a Non-Routine True-Up
Mechanism Advice Letter with the CPUC designating the adjustments to the model
and any corresponding adjustments to the DRC Charges (collectively, a “Non-Routine
True-Up Adjustment”).

 

(ii)                                  The
Servicer shall take all reasonable actions and make all reasonable efforts to
secure any Non-Routine True-Up Adjustments.

 

(iii)                               The
Servicer shall implement any resulting adjustments to the model and any
resulting revised DRC Charges as of the first day of the Quarter that begins at
least 90 days after the Non-Routine True-Up Mechanism Advice Letter is filed.

 

(d)                                 Reports.

 

(i)                                     Notification
of Advice Letter Filings and True-Up Adjustments.  Whenever the Servicer files an Advice Letter
with the CPUC, the Servicer shall send a copy of such filing (together with a
copy of all notices and documents which, in the Servicer’s reasonable judgment,
are material to the adjustments effected by such Advice

 

24

 

Letter)
to the Issuer, the Trustee and the Rating Agencies concurrently therewith.  If any True-Up Adjustment requested in any
such Advice Letter filing does not become effective on the applicable date as
provided by the Financing Order, the Servicer shall notify the Issuer, the
Trustee and the Rating Agencies by the end of the second Servicer Business Day
after such applicable date.

 

(ii)                                  Periodic
Servicer’s Certificate.  Not later
than the Monthly Remittance Date immediately prior to each Payment Date, the
Servicer shall deliver a written report substantially in the form of Exhibit
B hereto to the Issuer, the Trustee and the Rating Agencies.

 

(iii)                               Bill
Presentation and Notices to Consumers:

 

(A)                              After
each revised DRC Charge has gone into effect pursuant to a True-Up Adjustment,
the Servicer shall, only to the extent and in the manner and time frame
required by applicable CPUC Regulations, if any, cause to be prepared and
delivered to Consumers a notice announcing such revised DRC Charges.

 

(B)                                The
Servicer may combine the amounts of all of the DRC Charges for all Series of
Bonds and the Energy Recovery Bond Balancing Account (ERBBA) charge authorized
by the Financing Order (collectively, the “Bond Charges”) into a single line
item on Consumers’ bills, titled “Energy Cost Recovery Amount,” and the back of
Consumers’ bills shall have a definition of the “Energy Cost Recovery Amount”
that states substantially as follows, subject to future CPUC Regulations:

 

Energy Cost Recovery Amount:  These charges are approved by the CPUC and
authorized by California Public Utilities Code Section 848 et seq.  The purpose of these charges is to pay the
principal, interest, and other costs associated with Energy Recovery Bonds
(Bonds) that were

 

25

 

issued
by a Special Purpose Entity (SPE).  One
of these charges is the Dedicated Rate Component (DRC), which is $0.00XXX per
kWh.  The right to receive DRC revenues
has been transferred to the SPE and does not belong to PG&E.  This right is called Recovery Property.  PG&E collects the DRC on behalf of the
SPE, which uses these funds to pay Bond principal, interest, and other Bond
related costs.  The SPE transferred the
net Bond proceeds to PG&E to purchase Recovery Property from PG&E.  PG&E used the proceeds from the sale of
Recovery Property to refinance its bankruptcy Regulatory Asset, which was
established by the Commission to help finance PG&E’s emergence from
bankruptcy.

 

(C)                                Except
to the extent that applicable CPUC Regulations make the Applicable ESP
responsible for such costs, the Servicer shall pay from its own funds all costs
of preparation and delivery incurred in connection with clauses (A) and (B)
above, including but not limited to printing and postage costs as the same may
increase or decrease from time to time.

 

(iv)                              ESP
Reports.  The Servicer shall provide
to the Rating Agencies any publicly available reports filed by the Servicer
with the CPUC (or otherwise made publicly available by the Servicer) relating
to ESPs and any other non-confidential and non-proprietary information relating
to ESPs reasonably requested by the Rating Agencies.

 

SECTION 4.02.                 Limitation of Liability.

 

(a)                                  The
Issuer and the Servicer expressly agree and acknowledge that:

 

(i)                                     In
connection with any True-Up Adjustment, the Servicer is acting solely in its
capacity as the Servicer hereunder.

 

(ii)                                  Neither
the Servicer nor the Issuer is responsible in any manner for, and shall have no
liability whatsoever as a result of any action, decision, ruling or other
determination made or not made, or any delay (other than any delay resulting
from the

 

26

 

Servicer’s failure
to file the applications required by Section 4.01 in a timely and correct
manner or other breach by the Servicer of its duties under this Agreement), by
the CPUC in any way related to the Recovery Property or in connection with any
True-Up Adjustment, the subject of any filings under Section 4.01, any
proposed True-Up Adjustment, or the approval of any revised DRC Charges and the
scheduled adjustments thereto.

 

(iii)                               The
Servicer shall have no liability whatsoever relating to the calculation of any
revised DRC Charges and the scheduled adjustments thereto, including as a
result of any inaccuracy of any of the assumptions made in such calculation
regarding expected electric usage volume, the rate of delinquencies and
write-offs and the amount of any Retained Collections, so long as the Servicer
has acted in good faith and has not acted in a grossly negligent manner in
connection therewith, nor shall the Servicer have any liability whatsoever as a
result of any Person, including the Bondholders, not receiving any payment,
amount or return anticipated or expected or in respect of any Bond generally,
except only to the extent that the same is caused by the Servicer’s gross
negligence, willful misconduct or bad faith.

 

(b)                                 Notwithstanding
the foregoing, the Servicer hereby acknowledges that the terms of this Section 4.02
are not intended to, and shall not, relieve the
Servicer of liability for any misrepresentation by the Servicer under Section 6.01
or for any breach by the Servicer of its other obligations under this
Agreement.

 

ARTICLE V

The Recovery Property

 

SECTION 5.01.                 Custody of Recovery Property Records.  To assure uniform quality in servicing the
Recovery Property and to reduce administrative costs, the Issuer hereby

 

27

 

revocably appoints the Servicer, and the Servicer
hereby accepts such appointment, to act as custodian of any and all documents
and records that the Seller shall keep on file, in accordance with its
customary procedures, relating to the Recovery Property, including copies of the
Financing Order and Advice Letters relating thereto and all documents filed
with the CPUC in connection with any True-Up Adjustment (collectively, the “Recovery
Property Records”), which are hereby constructively delivered to the applicable
Trustee, as pledgee of the Issuer (or, in the case of the Subsequent Recovery
Property, will as of the applicable Subsequent Sale Date be constructively
delivered to the applicable Trustee, as pledgee of the Issuer) with respect to
all Recovery Property.

 

SECTION 5.02.                 Duties of Servicer as Custodian.

 

(a)                                  Safekeeping.  The Servicer shall hold the Recovery Property
Records and maintain such accurate and complete accounts, records and computer
systems pertaining to the Recovery Property Records as shall enable the Servicer
to comply with this Agreement.  In
performing its duties as custodian the Servicer shall act with reasonable care,
using that degree of care and diligence that the Servicer exercises with
respect to comparable assets that the Servicer services for itself
or, if applicable, for others.  The
Servicer shall promptly report to the Issuer and the applicable Trustee any
failure on its part to hold the Recovery Property Records and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. 
Nothing herein shall be deemed to require an initial review or any
periodic review by the Issuer or any Trustee of the Recovery Property Records.  The Servicer’s duties to hold the Recovery
Property Records as set forth in this Section 5.02, to the extent such
Recovery Property Records have not been previously transferred to a successor
Servicer pursuant to Article VII, shall terminate three years after the
earlier of the date

 

28

 

on
which (i) the Servicer is succeeded by a successor Servicer in accordance with Article VII
hereof and (ii) no Bonds of any Series are outstanding.

 

(b)                                 Maintenance
of and Access to Records.  The
Servicer shall maintain the Recovery Property Records at 77 Beale Street, San
Francisco, California or at such other office as shall be specified to the
Issuer and the applicable Trustee by written notice at least 30 days prior to
any change in location.  The Servicer
shall make available for inspection to the Issuer and the applicable Trustee or
their respective duly authorized representatives, attorneys or auditors the
Recovery Property Records at such times during normal business hours as the
Issuer or the applicable Trustee shall reasonably request and which do not
unreasonably interfere with the Servicer’s normal operations.  Nothing in this Section 5.02(b) shall
affect the obligation of the Servicer to observe any applicable law (including
any CPUC Regulations) prohibiting disclosure of information regarding the
Consumers, and the failure of the Servicer to provide access to such
information as a result of such obligation shall not constitute a breach of
this Section 5.02(b).

 

(c)                                  Release
of Documents.  Upon instruction from
the applicable Trustee and subject to Section 6.08, the Servicer shall
release any Recovery Property Records to the applicable Trustee, the Trustee’s
agent or the Trustee’s designee, as the case may be, at such place or places as
the Trustee may designate, as soon as practicable.

 

(d)                                 Defending
Recovery Property Against Claims.  The Servicer agrees to take such legal or
administrative actions, including defending against or instituting and pursuing
legal actions and appearing or testifying at hearings or similar proceedings,
as may be reasonably necessary (i) to block or overturn any attempts to
cause a repeal, modification or supplement to the Statute or the Financing
Order or the rights of holders of Recovery Property by legislative

 

29

 

enactment, voter initiative or constitutional
amendment that would be materially adverse to Bondholders and (ii) to compel
performance by the CPUC or the State of California of any of their obligations
or duties under the PU Code, the Financing Order or any Advice Letter.  The costs of any such action shall be payable
from DRC Collections with respect to all Series of Bonds as an Operating
Expense in accordance with the priorities set forth in Section 8.02(d) of
each Indenture.  The Servicer’s
obligations pursuant to this Section 5.02 shall survive and continue
notwithstanding the fact that the payment of Operating Expenses pursuant to Section 8.02(d)
of the applicable Indenture may be delayed (it being understood that the
Servicer may be required to advance its own funds to satisfy its obligations
hereunder).

 

(e)                                  Seeking
to Prevent Expansion of Exemptions. 
The Servicer agrees to take such legal or administrative actions,
including defending against or instituting and pursuing legal actions and
appearing or testifying at hearings or similar proceedings, as may be
reasonably necessary to attempt to prevent the granting by the State of
California or the CPUC, after the Closing Date, of any material exemptions from
the obligation to pay DRC Charges that are not expressly provided for in the
Statute, other than an exemption for the Bay Area Rapid Transit District, and
that violate the State Pledge or any other obligations of the State of
California or the CPUC under the Statute. 
The Servicer shall have no obligations under this paragraph if it is not
being reimbursed on a current basis for its costs and expenses in taking such
actions, and shall not be required to advance its own funds to satisfy its
obligations hereunder.

 

SECTION 5.03.                 Effective Period and Termination.  The Servicer’s appointment as custodian shall
become effective as of the Closing Date and shall continue in full force and
effect until terminated pursuant to this Section.  If the Servicer shall resign as Servicer in
accordance with the provisions of this Agreement or if all of the rights and
obligations of the

 

30

 

Servicer shall have been terminated under Section 7.01,
the appointment of the Servicer as custodian shall be simultaneously terminated
automatically.

 

SECTION 5.04.                 General Indemnification of Trustee.  The Servicer hereby agrees to indemnify and
hold harmless each Trustee and its directors, officers, employees and agents
from and against any and all liabilities, obligations, losses, damages,
payments, claims, costs or expenses of any kind whatsoever (collectively, “Losses”)
incurred by or asserted against any such Person as a result of or in connection
with the transactions contemplated by this Agreement or any Basic Document,
other than any Loss incurred by reason or result of the negligence or willful
misconduct of such Trustee.  The
obligations of the Servicer set forth in this Section shall survive the
termination of this Agreement or the earlier resignation or removal of such
Trustee under the Indenture.

 

ARTICLE VI

The Servicer

 

SECTION 6.01.                 Representations and Warranties of Servicer.  The Servicer makes the following
representations and warranties, as of the Closing Date, as of each Subsequent
Sale Date relating to the sale of Subsequent Recovery Property pursuant to a
Subsequent Sale Agreement, and as of such other dates as expressly provided in
this Section 6.01, on which the Issuer and the Trustee are deemed to have
relied in entering into this Agreement relating to the servicing of the
Recovery Property.  The representations
and warranties shall survive the execution and delivery of this Agreement and
the pledge thereof to the applicable Trustee pursuant to the applicable
Indenture.

 

(a)                                  Organization
and Good Standing.  The Servicer is
duly organized and validly existing as a corporation in good standing under the
laws of the state of its incorporation, with the requisite corporate power and
authority to own its properties and to conduct its business

 

31

 

as
such properties are currently owned and such business is presently conducted,
and to execute, deliver and carry out the terms of this Agreement.

 

(b)                                 Due
Qualification.  The Servicer is duly
qualified to do business, is in good standing and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business (including the servicing of the
Recovery Property as required by this Agreement) requires such qualifications,
licenses or approvals (except where the failure to so qualify would not be
reasonably likely to have a material adverse effect on the Servicer’s business,
operations, assets, revenues or properties or adversely affect the servicing of
the Recovery Property).

 

(c)                                  Power
and Authority.  The Servicer has the
requisite power and authority to execute and deliver this Agreement and to
carry out its terms; and the execution, delivery and performance by the
Servicer of this Agreement have been duly authorized by the Servicer by all
necessary corporate action.

 

(d)                                 Binding
Obligation.  This Agreement
constitutes a legal, valid and binding obligation of the Servicer enforceable
against the Servicer in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally from time to time in
effect and to general principles of equity (including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing),
regardless of whether considered in a proceeding in equity or at law.

 

(e)                                  No
Violation.  The consummation by the
Servicer of the transactions contemplated by this Agreement and the fulfillment
by the Servicer of the terms hereof shall not conflict with, result in any
breach of any of the terms and provisions of, nor constitute (with or without
notice or lapse of time) a material default under, the articles of
incorporation or bylaws

 

32

 

of the Servicer, or any indenture, material agreement
or other instrument to which the Servicer is a party or by which it or any of
its property is bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument other than the Basic Documents or any lien
created pursuant to the Statute, the Financing Order, or the Issuance Advice
Letter; nor violate any existing law or any order, rule or regulation
applicable to the Servicer of any court or of any Federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties.

 

(f)                                    No
Proceedings.  There are no
proceedings or investigations pending or, to the Servicer’s best knowledge,
threatened, against the Servicer, before any court, Federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties involving or relating to the
Servicer or the Issuer or, to the Servicer’s knowledge, any other Person:  (i) asserting (A) the invalidity of this
Agreement, or (B) the invalidity of the Indenture, any of the other Basic
Documents or the Bonds, (ii) seeking to prevent the issuance of the Bonds or
the consummation of any of the transactions contemplated by this Agreement, the
Indenture or any of the other Basic Documents, (iii) that would have an outcome
that could reasonably be expected to materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability against the Servicer of, this Agreement, the Indenture, any of
the other Basic Documents or the Bonds or (iv) relating to the Servicer and
that might adversely affect the Federal or State of California income or
franchise tax attributes of the Bonds.

 

(g)                                 Approvals.  No approval, authorization, consent, order or
other action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other

 

33

 

governmental instrumentality is required in connection
with the execution and delivery by the Servicer of this Agreement, the
performance by the Servicer of the transactions contemplated hereby or the
fulfillment by the Servicer of the terms hereof, except those that have been
obtained or made and those that the Servicer is required to make in the future
pursuant to Article IV hereof.

 

(h)                                 Collections
Curve.  The Monthly Collections Curve
used in connection with Attachment A to Annex I hereto
is accurate in all material respects, and the future delivery of each revised
Monthly Collections Curve shall constitute a representation and warranty that
each such revised Monthly Collections Curve is accurate in all material
respects.

 

(i)                                     Assumptions.  The assumptions set forth in Attachment A to
Annex I hereto are reasonable based upon historical performance and will be
reasonable at any time that they are changed by the Servicer.

 

(j)                                     Reports
and Certificates.  Each report and
certificate delivered in connection with an Advice Letter will constitute a
representation and warranty by the Servicer that each such report or
certificate, as the case may be, is true and correct in all material respects
or, to the extent that any such report or certificate is based in part upon or
contains assumptions, forecasts or other predictions of future events, such
assumptions, forecasts or other predictions of future events are reasonable based
upon historical performance and the facts known to the Servicer on the date
such report or certificate was or is delivered.

 

SECTION 6.02.                 Indemnities of Servicer; Release of Claims.

 

(a)                                  The
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement.

 

34

 

(b)                                 The
Servicer shall indemnify the Issuer, each Trustee for itself and on behalf of
the applicable Bondholders, and each of the respective officers, directors,
employees and agents of the Issuer and each Trustee for, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed on, incurred by or asserted against any such Person as a result of (i)
the Servicer’s willful misconduct, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this Agreement
or the Servicer’s reckless disregard of its obligations and duties under this
Agreement or (ii) the Servicer’s breach of any of its representations or
warranties in this Agreement; provided, however, that the Servicer will not be liable for any Losses resulting from the willful
misconduct or negligence or breach of a representation or warranty in any of
the Basic Documents by the party seeking indemnification.

 

(c)                                  Indemnification
under Section 6.02(b) shall survive the resignation or removal of the
Trustee or the termination of this Agreement and shall include reasonable fees
and expenses of investigation and litigation (including reasonable attorneys fees and expenses).

 

SECTION 6.03.                 Merger or Consolidation of, or Assumption of the Obligations of,
Servicer.  Any Person (a) into
which the Servicer may be merged or consolidated and that succeeds to all or
substantially all of the electric distribution business of the Servicer, (b)
that results from the division of the Servicer into two or more entities and
succeeds to all or substantially all of the electric distribution business of
the Servicer, (c) that may result from any merger or consolidation to which the
Servicer shall be a party and succeeds to all or substantially all of the
electric distribution business of the Servicer, or (d) that may otherwise
succeed to all or substantially all of the electric transmission or
distribution business of the Servicer, shall be the successor to the Servicer
under this Agreement; provided, however,
that (i) such successor must

 

35

 

execute an agreement of assumption to perform every
obligation of the Servicer hereunder, (ii) immediately after giving effect to
such transaction, no Servicer Default and no event that, after notice or lapse
of time, or both, would become a Servicer Default shall have occurred and be
continuing, (iii) the Servicer shall have delivered to the Issuer, each Trustee
and the Rating Agencies an Officers’ Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption complies with this Section and that all conditions precedent
provided for in this Agreement relating to such transaction have been complied
with and (iv) prior written notice shall have been delivered to the Rating
Agencies.  Notwithstanding anything
herein to the contrary, the execution of the foregoing agreement of assumption
and compliance with clauses (i) and (ii) above shall be conditions to the
consummation of the transactions referred to in clauses (a), (b), (c) and (d)
above.  If all the conditions to any such
assumption are met, then the prior Servicer will automatically be released from
all of its obligations under this Agreement other than indemnification
obligations relating to acts or omissions of the prior Servicer prior to such
release.

 

SECTION 6.04.                 Limitation on Liability of Servicer and Others.  Neither the Servicer nor any of the directors
or officers or employees or agents of the Servicer shall be liable to the
Issuer, any Trustee, the Bondholders or any other Person, except as provided under
this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement or for errors in judgment; provided, however, that this provision shall
not protect the Servicer or any such person against any liability that would
otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties under this Agreement. 
The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on the advice of

 

36

 

counsel
or on any document of any kind, prima facie properly executed and submitted by
any Person, respecting any matters arising under this Agreement.

 

Except
as provided in this Agreement, the Servicer shall not be under any obligation
to appear in, prosecute or defend any legal action that shall not be related to
or incidental to its duties to service the Recovery Property in accordance with
this Agreement, and that in its opinion may involve it in any expense or
liability.

 

SECTION 6.05.                 Pacific Gas and Electric Company Not to Resign as Servicer.  Subject to the provisions of Section 6.03,
Pacific Gas and Electric Company shall not resign from the obligations and
duties hereby imposed on it as Servicer under this Agreement except upon either
(a) a determination that the performance of its duties under this Agreement
shall no longer be permissible under applicable law or (b) satisfaction of the
following: (i) the Rating Agency Condition shall have been satisfied and (ii)
the CPUC shall have approved such resignation pursuant to Section 8.12.  Notice of any such determination permitting
the resignation of Pacific Gas and Electric Company pursuant to clause (a)
shall be communicated to the Issuer, each Trustee and the Rating Agencies at
the earliest practicable time (and, if such communication is not in writing,
shall be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Issuer and each Trustee, with a copy to the CPUC, concurrently
with or promptly after such notice.  No
such resignation shall become effective until a successor Servicer shall have
assumed the responsibilities and obligations of Pacific Gas and Electric
Company in accordance with Section 7.02.

 

37

 

SECTION 6.06.                 Servicing Compensation.

 

(a)                                  In
consideration for its services hereunder, until the Retirement Date, the
Servicer shall receive a fee (the “Servicing Fee”) with respect to each Series
of Bonds quarterly on each Payment Date in an amount equal to one-fourth of
0.09 percent of the initial aggregate principal balance of such Series of
Bonds.  The Servicer also shall be
entitled to retain as additional compensation (i) any net interest earnings on
DRC Payments received by the Servicer and invested by the Servicer pursuant to Section 6(d)
of Annex I hereto during each Collection Period prior to remittance to the
applicable Collection Account and (ii) all late payment charges, if any,
collected from Consumers or ESPs, to the extent available.

 

(b)                                 The
Servicing Fee set forth in Section 6.06(a) above shall be paid to the
Servicer by the applicable Trustee, on each Payment Date in accordance with the
priorities set forth in Section 8.02(d) of the applicable Indenture, by
wire transfer of immediately available funds from the applicable Collection
Account to an account designated by the Servicer.  Any portion of the Servicing Fee not paid on
such date shall be added to the Servicing Fee payable on the subsequent Payment
Date.

 

(c)                                  Except
as provided in Sections 5.02(d) and 5.02(e), the Servicer shall be required to
pay from its own account all expenses incurred by it in connection with its
activities hereunder (including any fees to and disbursements by accountants,
counsel, or any other Person, any taxes imposed on the Servicer and any
expenses incurred in connection with reports to Bondholders) out of the
compensation retained by or paid to it pursuant to this Section 6.06, and
shall not be entitled to any extra payment or reimbursement therefor.  In no event, however, shall the Servicer pay
any fees or expenses of professional service firms or other third parties for

 

38

 

services
or goods provided to the Issuer including, but not limited to, accounting
services and legal services, even if such services are procured by the
Servicer.

 

SECTION 6.07.                 Compliance
With Applicable Law.  The Servicer covenants and agrees, in
servicing the Recovery Property, to comply with all laws applicable to, and
binding upon, the Servicer and relating to such Recovery Property the
noncompliance with which would have a material adverse effect on the value of
the Recovery Property; provided, however,
that the foregoing is not intended to, and shall not, impose any liability on
the Servicer for noncompliance with any law that the Servicer is contesting in
good faith in accordance with its customary standards and procedures.

 

SECTION 6.08.                 Access to Certain Records and Information Regarding Recovery
Property.  The Servicer shall
provide to the applicable Bondholders and the applicable Trustee access to the
Recovery Property Records in its possession in such cases where the Bondholders
and the Trustee shall be required by applicable law to be provided access to
such records.  Access shall be afforded
without charge, but only upon reasonable request and during normal business
hours at the respective offices of the Servicer.  Nothing in this Section shall affect the
obligation of the Servicer to observe any applicable law (including any CPUC
Regulation) prohibiting disclosure of information regarding the Consumers, and
the failure of the Servicer to provide access to such information as a result
of such obligation shall not constitute a breach of this Section or any
other provision of this Agreement.

 

SECTION 6.09.                 Appointments. 
The Servicer may at any time appoint any Person to perform all or any
portion of its obligations as Servicer hereunder; provided, however, that (a) if such Person is not an affiliate
of the Servicer, the Rating Agency Condition shall have been satisfied in
connection therewith and (b) the CPUC shall have approved such appointment

 

39

 

pursuant to any CPUC Regulations to the extent
required by law; provided further that the Servicer shall remain obligated and
be liable to the Issuer, the applicable Trustee and the applicable Bondholders
for the servicing and administering of the Recovery Property in accordance with
the provisions hereof without diminution of such obligation and liability by
virtue of the appointment of such Person and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the Recovery Property; and provided further, however, that
nothing herein shall preclude the execution by the Servicer of an ESP Service
Agreement with ESPs.  The fees and
expenses of such Person shall be as agreed between the Servicer and such Person
from time to time and none of the Issuer, any Trustee, the Bondholders or any
other Person shall have any responsibility therefor or right or claim
thereto.  Any such appointment shall not
constitute a Servicer resignation under Section 6.05.

 

SECTION 6.10.                 No
Servicer Advances.  The Servicer
shall not make any advances of interest or principal on the Bonds.

 

SECTION 6.11.                 Remittances.

 

(a)                                  Subject
to clause (d) below, on each Monthly Remittance Date, with respect to each
Series of Bonds, the Servicer shall cause to be made a wire transfer of
immediately available funds equal to the Aggregate Monthly Remittance Amount
for the applicable Collection Period to the Trustee for deposit to the General
Subaccount of the Collection Account. 
Prior to each remittance to the General Subaccount of the Collection
Account pursuant to this Section, the Servicer shall provide written notice to
the Trustee of each such remittance (including the exact dollar amount to be
remitted).

 

(b)                                 The
Servicer agrees and acknowledges that it holds all DRC Payments collected by it
for the benefit of the Issuer and that all DRC Payments collected by it will be

 

40

 

remitted
by the Servicer in accordance with this Section without any surcharge,
fee, offset, charge or other deduction except (i) as set forth in clauses (c),
(d), (e) or (f) below and (ii) for late fees permitted by Section 6.06.  The Servicer further agrees not to make any
claim to reduce its obligation to remit all DRC Payments collected by it in
accordance with this Agreement except (i) as set forth in clauses (c), (d), (e)
or (f) below and (ii) for late fees permitted by Section 6.06.

 

(c)                                  If
on any Monthly Remittance Date there is an Excess Remittance with respect to
any Series, the Servicer shall be entitled either (i) to reduce the amount that
the Servicer remits to the General Subaccount of the Collection Account for
that Series on such Monthly Remittance Date by the amount of such Excess
Remittance, the amount of such reduction becoming the property of the Servicer
or (ii) immediately to be paid from the Collection Account for that Series
or any subaccount therein the amount of such Excess Remittance, such payment
becoming the property of the Servicer. 
If on any Monthly Remittance Date there is a Remittance Shortfall with
respect to any Series, the amount that the Servicer remits to the General
Subaccount of the Collection Account for that Series on such Monthly Remittance
Date will be increased by the amount of such Remittance Shortfall, such
increase coming from the Servicer’s own funds.

 

(d)                                 Notwithstanding
the foregoing clauses (a), (b) and (c), during any period in which either (i) a
Servicer Default  has occurred and is
continuing or (ii) the Servicer’s short-term debt ratings are not  A-1 or better by Standard & Poor’s, P-1
or better by Moody’s and F1 or better by Fitch, the Servicer shall, with
respect to each Series of Bonds, remit to the Trustee for deposit to the
General Subaccount of the Collection Account by wire transfer of immediately
available funds the total DRC Payments estimated to have been received by the
Servicer from

 

41

 

Consumers on a given Servicer Business Day in respect
of all previously billed DRC Charges within two Servicer Business Days of
receipt thereof by the Servicer (the “Daily Remittance”).

 

(e)                                  On
or before each Monthly Remittance Date during any period when Daily Remittances
are required, the Servicer shall, with respect to each Series of Bonds, compare
the amount of Daily Remittances remitted during the preceding Collection Period
with the amount that would have been remitted for that month based on the
Monthly Collections Curve (the “Required Monthly Remittance”), and (i) if the
aggregate amount of Daily Remittances is greater than the Required Monthly
Remittance, the Servicer shall reduce the amount that the Servicer remits to
the General Subaccount of the Collection Account on such Monthly Remittance
Date and any subsequent date by the amount of such excess, the amount of such
reduction becoming the property of the Servicer and (ii) if the aggregate
amount of Daily Remittances is less than the Required Monthly Remittance, the
amount that the Servicer remits to the General Subaccount of the Collection
Account on such Monthly Remittance Date will be increased by the amount of such
shortfall, such increase coming from the Servicer’s own funds.

 

(f)                                    On
or before each Monthly Remittance Date during any period when Daily Remittances
are required, the Servicer shall, with respect to each Series of Bonds,
calculate the amount of any Remittance Shortfall or Excess Remittance and
follow the procedures set forth in clause (c) above with respect to any such
Remittance Shortfall or Excess Remittance, provided that if an Excess
Remittance exists, the Servicer shall reduce the amount of each Daily
Remittance (beginning with the Daily Remittance occurring on the Monthly
Remittance Date) by the outstanding amount of such Excess Remittance until the
balance of the Excess Remittance has been reduced to zero.

 

42

 

(g)                                 Any
amounts collected by the Servicer that represent partial payments of the total
amount billed to Consumers will be allocated between the Issuer and PG&E,
based on the ratio of the billed amount for the DRC Charges for all Series of
Bonds to the total billed amount.  If
such amounts are billed and collected by the Servicer for an ESP pursuant to a
consolidated billing arrangement, payment shortfalls resulting from partial
payments by Consumers shall be allocated proportionally between charges owing
to or collected by the Servicer or PG&E (including the DRC Charge for all
Series of Bonds) and amounts owing to the ESP, based on the ratio of the
amounts due from Consumers as billed by the Servicer; provided, however, that
when the Servicer evaluates a delinquent residential service account for
service termination, partial payments may, to the extent permitted by a CPUC
Regulation, be allocated first to delinquent disconnectable charges (including
the DRC Charge for all Series of Bonds) and then to delinquent ESP charges.

 

(h)                                 Notwithstanding
any other provision of this Agreement, the Servicer shall not be obligated to
remit to the Issuer, any Trustee, or any other person or entity, or to hold in
trust, any Retained Collections.  If at
any time, an order or decision of the CPUC shall provide that any Retained
Collections retained by the Servicer are required to be delivered to the Issuer
or a Trustee, then the Servicer shall pay such amounts to the applicable
Trustee promptly after such order or decision becomes final and non-appealable.

 

ARTICLE VII

Default

 

SECTION 7.01.                 Servicer Default. 
If any one of the following events (a “Servicer Default”) shall occur
and be continuing:

 

(a)                                  any failure by the Servicer to remit to the applicable
Trustee for deposit in the Collection Account for the applicable Series any
required remittance for a Series of Bonds

 

43

 

that shall continue unremedied for a period of five
Business Days after written notice of such failure is received by the Servicer
from the Issuer or the Trustee or after discovery of such failure by an officer
of the Servicer; or

 

(b)                                 any
failure by the Servicer to duly perform its obligations to make DRC Charge
true-up adjustment filings for any Series of Bonds in the time and manner set
forth in this Agreement, which failure continues unremedied for a period of
five Business Days after written notice of that failure is received by the
Servicer from the Issuer or the applicable Trustee;

 

(c)                                  any
failure on the part of the Servicer duly to observe or to perform in any material
respect any other covenants or agreements of the Servicer set forth in this
Agreement (including Section 4.01) or any other Basic Document to which it
is a party, which failure shall (i) materially and adversely affect the rights
of Bondholders and (ii) continue unremedied for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given (A) to the Servicer by the Issuer or (B) to the
Servicer by any Trustee or by the Holders of Bonds evidencing not less than 25
percent of the Outstanding Amount of the Bonds of all Series; or

 

(d)                                 any
representation or warranty made by the Servicer in this Agreement shall prove
to have been incorrect when made, that has a material adverse effect on the
Issuer or the Bondholders and which material adverse effect continues
unremedied for a period of 60 days after the date on which written notice
thereof, requiring the same to be remedied, shall have been delivered to the
Servicer by the Issuer or any Trustee; or

 

(e)                                  an
Insolvency Event occurs with respect to the Servicer or the Seller; then, and
in each and every case, so long as the Servicer Default shall not have been
remedied, either the applicable Trustee, or the Holders of Bonds evidencing not
less than a majority of the

 

44

 

Outstanding Amount of the Bonds of each affected
Series, by notice then given in writing to the Servicer (and to the applicable
Trustee if given by the Bondholders) (a “Termination Notice”) may terminate all
the rights and obligations of the Servicer under this Agreement with respect to
that Series, subject to compliance with Section 7.02.  In addition, upon a Servicer Default
described in Section 7.01(a), each of the following shall be entitled to
apply to the CPUC for sequestration and payment of revenues arising with
respect to the Recovery Property:  (i)
the holders of any Bonds and any Trustee or representative thereof as
beneficiaries of any statutory or other lien provided or permitted by the PU
Code; (ii) the Issuer or its assignees; or (iii) pledgees or transferees,
including transferees under Section 848.4 of the PU Code, of the Recovery
Property.  On or after the receipt by the
Servicer of a Termination Notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Bonds, the Recovery Property, the
DRC Charges or otherwise, shall, without further action, pass to and be vested
in such successor Servicer as may be appointed under Section 7.02; and,
without limitation, the applicable Trustee is hereby authorized and empowered
to execute and deliver, on behalf of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such Termination Notice, whether to complete the transfer of
the Recovery Property Records and related documents, or otherwise.  The predecessor Servicer shall cooperate with
the successor Servicer, the Issuer and each Trustee in effecting the
termination of the responsibilities and rights of the predecessor Servicer
under this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for remittance, or shall thereafter be received by it with
respect to the Recovery Property or the DRC Charges.  All reasonable costs and expenses

 

45

 

(including reasonable
attorneys fees and expenses) incurred in connection with transferring the
Recovery Property Records to the successor Servicer and amending this Agreement
to reflect such succession as Servicer pursuant to this Section shall be
paid by the predecessor Servicer upon presentation of reasonable documentation
of such costs and expenses.

 

SECTION 7.02.                 Appointment of Successor.

 

(a)                                  Upon
the Servicer’s receipt of a Termination Notice pursuant to Section 7.01 or
the Servicer’s resignation or removal in accordance with the terms of this
Agreement, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, and shall be entitled to receive the Servicing
Fee, until a successor Servicer shall have assumed in writing the obligations
of the Servicer hereunder as described below. 
In the event of the Servicer’s termination hereunder, the Issuer shall
appoint a successor Servicer with the applicable Trustee’s prior written
consent thereto (which consent shall not be unreasonably withheld) and the
written approval of the CPUC pursuant to Section 8.12, and the successor
Servicer shall accept its appointment by a written assumption in form
acceptable to the Issuer and the applicable Trustee.  If within 30 days after the delivery of the
Termination Notice, the Issuer shall not have obtained such a new Servicer, the
applicable Trustee may petition the CPUC or a court of competent jurisdiction
to appoint a successor Servicer under this Agreement.  A Person shall qualify as a successor
Servicer only if (i) such Person is permitted under CPUC Regulations to perform
the duties of the Servicer, (ii) the Rating Agency Condition shall have been
satisfied and (iii) such Person enters into a servicing agreement with the
Issuer having substantially the same provisions as this Agreement.

 

(b)                                 Upon
appointment, the successor Servicer shall be the successor in all respects to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and

 

46

 

 

 

liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and all the
rights granted to the predecessor Servicer by the terms and provisions of this
Agreement.

 

SECTION 7.03.      Waiver of Past Defaults.  The Holders of Bonds evidencing not less than
a majority of the Outstanding Amount of the Bonds of each Series may, on behalf
of all Bondholders of that respective Series, waive in writing any default by
the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required remittances to the
applicable Trustee for deposit to the Collection Account in accordance with
this Agreement.  Upon any such waiver of
a past default, such default shall cease to exist, and any Servicer Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement.  No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.

 

SECTION 7.04.      Notice of Servicer Default.  The Servicer shall deliver to the Issuer,
each Trustee, the CPUC and the Rating Agencies, promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter,
written notice in an Officers’ Certificate of any event that with the giving of
notice or lapse of time, or both, would become a Servicer Default under Section
7.01(a) or (b).

 

ARTICLE VIII

Miscellaneous Provisions

 

SECTION 8.01.      Amendment.

 

(a)           This Agreement may be amended in
writing by the Servicer and the Issuer with the prior written consent of the
CPUC pursuant to Section 8.12 and the prior written consent of each Trustee,
which consent of each Trustee will not be unreasonably withheld, delayed or
conditioned, and upon satisfaction of the Rating Agency Condition, but without
the consent of

 

47

 

any of the Bondholders, (i) to cure any ambiguity, to correct or
supplement any provisions in this Agreement, (ii) to add additional Recovery
Property and Series of Bonds under this Agreement or (iii) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of the
Bondholders; provided, however, that any
such amendment pursuant to clause (iii) shall not, as evidenced by an Officer’s
Certificate delivered to the Issuer and each Trustee, adversely affect in any
material respect the interests of any Bondholder.  For purposes of this paragraph (a), any
amendment that increases the Servicing Fee payable to a successor Servicer
shall not be treated as adversely affecting the interests of any Bondholder so
long as the Servicing Fee is within the range approved in the Financing Order.

 

(b)           This Agreement may also be amended in
writing from time to time by the Servicer and the Issuer with prior written
notice given to the Rating Agencies and the prior written consent of the CPUC
pursuant to Section 8.12, the applicable Trustee and Holders of Bonds
evidencing not less than a majority of the Outstanding Amount of the Bonds of
each Series affected by any such amendment, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Bondholders of
such Series; provided, however, that no
such amendment shall (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, DRC Collections or (ii) reduce the
aforesaid percentage of the Outstanding Amount of any Series of Bonds, the
Holders of which are required to consent to any such amendment, without the
consent of the Holders of all the outstanding Bonds of each such Series.

 

48

 

Promptly after the execution of any such amendment and
the requisite consents, the Issuer shall furnish written notification of the
substance of such amendment to the applicable Trustee and each of the Rating
Agencies.

 

It shall not be necessary for the consent of
Bondholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.

 

(c)           Prior to its consent to any amendment
to this Agreement, any Trustee shall be entitled to receive and conclusively
rely upon an Opinion of Counsel stating that such amendment is authorized or
permitted by this Agreement.  Each
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Trustee’s own rights, duties or immunities under this Agreement or
otherwise.

 

(d)           Notwithstanding Sections 8.01(a) or
8.01(b), or anything to the contrary in this Agreement, the Servicer and the
Issuer may amend Annex I to this Agreement in writing with prior written notice
given to each Trustee, the CPUC and the Rating Agencies, but without the
consent of any Trustee, the CPUC, any Rating Agency or any Bondholder, solely
to address changes to the Servicer’s method of calculating DRC Payments received
as a result of changes to the Servicer’s current computerized customer
information system; provided that any such amendment shall not have or cause a
material adverse effect on the Bondholders.

 

SECTION 8.02.      Accounts and Records.

 

(a)           The Servicer shall maintain separate
accounts and records as to the Initial Recovery Property and as to Subsequent
Recovery Property relating to any additional Series of Bonds accurately and in
accordance with its standard accounting procedures and in sufficient detail to
permit reconciliation between DRC Payments received by the Servicer and DRC

 

49

 

Collections from time to time remitted to the applicable Trustee for
deposit in the Collection Account for each Series.

 

(b)           The Servicer shall permit each
Trustee and its agents at any time during normal business hours, upon
reasonable notice to the Servicer and to the extent it does not unreasonably
interfere with the Servicer’s normal operations, to inspect, audit and make
copies of and abstracts from the Servicer’s records regarding the related
Recovery Property and the DRC Charges. 
Nothing in this Section 8.02(b) shall affect the obligation of the
Servicer to observe any applicable law (including any CPUC Regulation) prohibiting
disclosure of information regarding the Consumers, and the failure of the
Servicer to provide access to such information as a result of such obligation
shall not constitute a breach of this Section 8.02(b).

 

SECTION 8.03.      Notices.  All demands, notices and communications upon
or to the Servicer, the Issuer, any Trustee or the Rating Agencies under this
Agreement shall be in writing and personally delivered, sent by overnight mail
or sent by telecopy or other similar form of rapid transmission, and shall be
deemed to have been duly given upon receipt (a) in the case of the Servicer, to
Pacific Gas and Electric Company, at 77 Beale Street, San Francisco, CA 94105,
Attention:  Treasurer, (b) in the case of
the Issuer, to PG&E Energy Recovery Funding LLC, at 245 Market Street, Room
424, San Francisco, CA 94105, Attention: 
President, (c) in the case of the Trustee, at the applicable Corporate
Trust Office, (d) in the case of Moody’s, to Moody’s Investors Service, Inc.,
ABS Monitoring Department, 99 Church Street, New York, New York 10007, (e) in
the case of Standard & Poor’s, to Standard & Poor’s Corporation, 55
Water Street, 40th Floor, New York, New York 10041, Attention of Asset Backed
Surveillance Department, (f) in the case of Fitch, to Fitch, Inc., One State
Street Plaza, New York, NY 10004, Attention of Asset-Backed Securities
Surveillance, (g) in the case of the CPUC, to California

 

50

 

Public Utilities Commission, 505 Van Ness Avenue, San Francisco,
California 94102, Attention of General Counsel, with copies to the attention of
the Executive Director and the Director of the Energy Division or (h) as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.

 

SECTION 8.04.      Assignment.  Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.03 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.

 

SECTION 8.05.      Limitations on Rights of Others.  The provisions of this Agreement are solely
for the benefit of the Servicer and the Issuer and, to the extent provided
herein or in the Basic Documents, each Trustee and the Bondholders and nothing
in this Agreement, whether express or implied, shall be construed to give to
any other Person any legal or equitable right, remedy or claim in the Recovery
Property or under or in respect of this Agreement or any covenants, conditions
or provisions contained herein.

 

SECTION 8.06.      Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

SECTION 8.07.      Separate Counterparts.  This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.

 

51

 

SECTION 8.08.      Headings.  The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.

 

SECTION 8.09.      Governing Law.  This Agreement shall be construed in
accordance with the laws of the State of California, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.

 

SECTION 8.10.      Assignment to Trustee.  The Servicer hereby acknowledges and consents
to the collateral assignment of any or all of the Issuer’s rights and
obligations hereunder to the applicable Trustee.

 

SECTION 8.11.      Nonpetition Covenants.  Notwithstanding any prior termination of this
Agreement or the Indenture, but subject to the CPUC’s right to order the
sequestration and payment of revenues arising with respect to the Recovery
Property notwithstanding any bankruptcy, reorganization or other insolvency
proceedings with respect to the debtor, pledgor or transferor of the Recovery
Property pursuant to Section 848.3(e) and (g) of the PU Code, the Servicer
shall not, prior to the date that is one year and one day after the termination
of all indentures for all series of energy recovery bonds issued by the Issuer,
acquiesce, petition or otherwise invoke or cause the Issuer to invoke the
process of any court or governmental authority for the purpose of commencing or
sustaining a case against the Issuer under any Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of the property of the Issuer or ordering the winding up or
liquidation of the affairs of the Issuer.

 

52

 

SECTION 8.12.      CPUC Consents.  Whenever the consent or approval of the CPUC
shall be required pursuant to Sections 6.05 (resignation of Servicer),
7.02 (appointment of successor Servicer) or 8.01 (amendments), the
Servicer or the Issuer shall follow the following procedures in obtaining such
consent or approval:

 

(a)           At least 30 calendar days prior to
any action requiring such consent or approval, the Servicer or the Issuer shall
deliver to each of the CPUC’s Executive Director, General Counsel and Director
of the Energy Division (or any successor to any of such positions, if any), at
the address specified in or provided pursuant to Section 8.03, written
notification of the proposed action, which notification shall contain:

 

(i)            a reference to the Financing Order;
and

 

(ii)           a statement identifying the person to
whom the CPUC or its staff is to address any response to the proposed action or
is to request additional time to respond to the proposed transaction.

 

(b)           If the CPUC or its staff have, within
30 calendar days of receiving a notification complying with Section 8.l2(a)
above, delivered to the office of the person specified in Section 8.12(a)(ii)
above a written statement that the CPUC might object to the proposed action,
then such proposed action shall not be effective unless and until the CPUC
subsequently delivers a written statement that it approves or consents to such
proposed action.

 

(c)           If the CPUC or its staff shall not
have delivered a written statement that the CPUC might object to such proposed
action within the time period described in Section 8.12(b) above, then the
CPUC shall be conclusively deemed to have approved or consented to the proposed
action, and such action may subsequently become effective upon the satisfaction
of any other conditions thereto.

 

53

 

(d)           Following the delivery of a notice to
the CPUC by the Servicer or the Issuer under Section 8.12(a) above, the Servicer
or the Issuer shall have the right at any time to withdraw from the CPUC
further consideration of any notification of a proposed action.

 

54

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective officers as of the date
first above written.

 

 

	
   

  	
  PG&E ENERGY RECOVERY FUNDING

  LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Michael J. Donnelly

  
	
   

  	
  Name:

  	
  Michael J. Donnelly

  
	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PACIFIC GAS AND ELECTRIC

  COMPANY

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Kent M. Harvey

  
	
   

  	
  Name:

  	
  Kent M. Harvey

  
	
   

  	
  Title:

  	
  Senior Vice President, Chief

  
	
   

  	
   

  	
  Financial Officer and
  Treasurer

  
	
   

  
	
   

  
	
  Acknowledged and
  Accepted:

  
	
   

  
	
  DEUTSCHE BANK
  NATIONAL TRUST COMPANY,

  
	
  not in

  
	
  its individual
  capacity

  
	
  but solely as
  Trustee

  
	
   

  
	
  By:

  	
  /s/ Ronaldo
  Reyes 

  	
   

  
	
  Name: Ronaldo
  Reyes

  
	
  Title: Vice
  President

  
						

 

 

EXHIBIT
A

 

ANNUAL CERTIFICATE OF COMPLIANCE

 

The undersigned hereby certifies that he/she is the
duly elected and acting                                 
of Pacific Gas and Electric Company, servicer (the “Servicer”) under the
Recovery Property Servicing Agreement dated as of [date] (the Servicing
Agreement”) between the Servicer and PG&E Energy Recovery Funding LLC (the “Issuer”)
and further that:

 

1.             A
review of the activities of the Servicer and of its performance under the
Servicing Agreement during the twelve months ended June 30, [year] has been
made under the supervision of the undersigned pursuant to Section 3.03 of the
Servicing Agreement; and

 

2.             To
the best of the undersigned’s knowledge, based on such review, the Servicer has
fulfilled all of its material obligations in all material respects under the
Servicing Agreement throughout the twelve months ended June 30, [year], except
for those material defaults in the fulfillment of material obligations listed
on Annex A hereto.

 

Executed as of this                 day
of                                    .

 

	
   

  	
  PACIFIC GAS AND
  ELECTRIC

  
	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  

 

A-1

 

ANNEX A

TO

CERTIFICATE OF
COMPLIANCE

 

LIST OF SERVICER
DEFAULTS

 

The following material
defaults known to the undersigned occurred during the year ended June 30,                  :

 

	
  Nature of Default

  	
   

  	
  Status

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

A-2

 

EXHIBIT
B

 

FORM OF QUARTERLY
SERVICER’S CERTIFICATE

 

Quarterly Servicer’s
Certificate

 

PG&E Energy
Recovery Funding LLC

$1,887,864,000 Energy Recovery Bonds, Series 2005-1

 

Pursuant to
Section 4.01(d)(ii) of the Recovery Property Servicing Agreement dated as of
February 10, 2005 (the “Agreement”) between Pacific Gas and Electric Company,
as Servicer and PG&E Energy Recovery Funding LLC, as Issuer, the Servicer
does hereby certify as follows:

 

Capitalized terms
used in the Quarterly Servicer’s Certificate (the “Quarterly Certificate”) have
their respective meanings as set forth in the Agreement.  References herein to certain sections and
subsections are references to the respective sections of the Agreement.

 

Collection
Periods:  xxx

Distribution Date:  xxx

 

	
  1.

  	
  Collections
  Allocable and Aggregate Amounts Available for the Current Distribution Date:

  	
   

  	
   

  	
   

  
	
   

  	
  i.

  	
  Remittances for the [ ]
  Collection Period

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
  Remittances for the [ ]
  Collection Period

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iii.

  	
  Remittances for the [ ]
  Collection Period

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  iv.(a)

  	
  Net earnings of General
  Sub-account

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  iv.(b)

  	
  Net earnings of Capital
  Sub-account

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  iv.(c)

  	
  Net earnings of
  Overcollateralization Sub-account

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  iv.(d)

  	
  Net earnings of Reserve
  Sub-account

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iv.

  	
  Total Net Earnings on
  Collection Account

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  v.

  	
  General
  Subaccount Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  vi.

  	
  Reserve Subaccount
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  vii.

  	
  Overcollateralization
  Subaccount Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  viii.

  	
  Capital Subaccount
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ix.

  	
  Collection
  Account Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
  2.

  	
  Outstanding
  Principal Balance and Collection Account Balance as of Prior Distribution
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  i.

  	
  Class A-1 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
  Class A-2 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iii.

  	
  Class A-3 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iv.

  	
  Class A-4 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  v.

  	
  Class A-5 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ix.

  	
  Energy
  Recovery Bond Principal Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  x.

  	
  Reserve Subaccount
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xi.

  	
  Overcollateralization
  Subaccount Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xii.

  	
  Capital Subaccount
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
  3.

  	
  Required
  Funding/Payments as of Current Distribution Date:

  	
   

  	
   

  	
   

  
	
   

  	
  i.

  	
  Projected Class A-1
  Bond Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
  Projected Class A-2
  Bond Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iii.

  	
  Projected Class A-3
  Bond Balance

  	
   

  	
  $

  	
  —

  	
   

  

 

B-1

 

	
   

  	
  iv.

  	
  Projected Class A-4
  Bond Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  v.

  	
  Projected Class A-5
  Bond Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ix.

  	
  Projected
  Class A Bond Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  x.

  	
  Required Class A-1
  Coupon

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xi.

  	
  Required Class A-2
  Coupon

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xii.

  	
  Required Class A-3
  Coupon

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xiii.

  	
  Required Class A-4
  Coupon

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xiv.

  	
  Required Class A-5
  Coupon

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xviii.

  	
  Required
  Overcollateralization Funding

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xix.

  	
  Required Capital
  Subaccount Funding

  	
   

  	
  $

  	
  —

  	
   

  
	
  4.

  	
  Allocation
  of Remittances as of Current Distribution Date Pursuant to 8.02(d) of
  Indenture:

  	
   

  	
   

  	
   

  
	
   

  	
  i.

  	
  Indenture Trustee Fees

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
  Quarterly Servicing Fee

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iii.

  	
  Quarterly
  Administration Fee

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iv.

  	
  Operating Expenses
  (subject to $400,000 cap, inclusive payments under i. and ii.)

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  v.

  	
  Quarterly
  Interest

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  1.

  	
  Class A-1 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  2.

  	
  Class A-2 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  3.

  	
  Class A-3 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  4.

  	
  Class A-4 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  5.

  	
  Class A-5 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  vi.

  	
  Principal Due and
  Payable

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  vii.

  	
  Quarterly
  Principal

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  1.

  	
  Class A-1 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  2.

  	
  Class A-2 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  3.

  	
  Class A-3 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  4.

  	
  Class A-4 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  5.

  	
  Class A-5 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  viii.

  	
  Operating Expenses (in
  excess of $400,000, inclusive payments under i. and ii.)

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ix.

  	
  Funding of
  Overcollateralization Subaccount (to required level)

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  x.

  	
  Funding of Capital
  Subaccount (to required level)

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xi.

  	
  Net Earnings Released
  to Issuer

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xii.

  	
  Released to Issuer upon
  Series Retirement: Overcollateralization Subaccount

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xiii.

  	
  Released to Issuer upon
  Series Retirement: Capital Subaccount

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xiv.

  	
  Deposits to Reserve
  Subaccount

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xv.

  	
  Released to Issuer upon
  Series Retirement: Collection Account

  	
   

  	
  $

  	
  —

  	
   

  
	
  5.

  	
  Outstanding
  Principal Balance and Collection Account Balance as of current distribution
  date:

  (after
  giving effect to payments to be made on such distribution date):

  	
   

  	
   

  	
   

  
	
   

  	
  i.

  	
  Class A-1 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
  Class A-2 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iii.

  	
  Class A-3 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iv.

  	
  Class A-4 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  v.

  	
  Class A-5 Principal
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ix.

  	
  Energy
  Recovery Bond Principal Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  x.

  	
  Reserve Subaccount
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xi.

  	
  Overcollateralization
  Subaccount Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  xii.

  	
  Capital Subaccount
  Balance

  	
   

  	
  $

  	
  —

  	
   

  
	
  6.

  	
  Subaccount
  Draws as of Current Distribution Date (if applicable, pursuant to Section
  8.02(e) of Indenture):

  	
   

  	
   

  	
   

  
	
   

  	
  i.

  	
  Reserve Subaccount

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
  Overcollateralization
  Subaccount

  	
   

  	
  $

  	
  —

  	
   

  

 

B-2

 

	
   

  	
  iii.

  	
  Capital Subaccount

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iv.

  	
  Total
  Draws

  	
   

  	
  $

  	
  —

  	
   

  
	
  7.

  	
  Shortfalls
  In Interest and Principal Payments as of Current Distribution Date:

  	
   

  	
   

  	
   

  
	
   

  	
  i.

  	
  Quarterly
  Interest

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  1.

  	
  Class A-1 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  2.

  	
  Class A-2 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  3.

  	
  Class A-3 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  4.

  	
  Class A-4 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  5.

  	
  Class A-5 Bond Coupon
  Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
  Quarterly
  Principal

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  1.

  	
  Class A-1 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  2.

  	
  Class A-2 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  3.

  	
  Class A-3 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  4.

  	
  Class A-4 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  5.

  	
  Class A-5 Bond
  Principal Payment

  	
   

  	
  $

  	
  —

  	
   

  
	
  8.

  	
  Shortfalls
  in Required Subaccount Levels as of Current Distribution Date:

  	
   

  	
   

  	
   

  
	
   

  	
  i.

  	
  Overcollateralization
  Subaccount

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
  Capital Subaccount

  	
   

  	
  $

  	
  —

  	
   

  
	
  9.

  	
  Distributions
  of Principal per $1,000 of Original Principal Amount as of Current
  Distribution Date:

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Original Principal

  [A]

  	
   

  	
  Outstanding Balance

  [B]

  	
   

  	
  Principal Payment

  [C]

  	
   

  	
  Principal Payment

  per $1,000 of

  Orig. Principal

  Amt.

  [C/A x 1,000]

  	
   

  
	
   

  	
  i.

  	
   

  	
  Class A-1

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
   

  	
  Class A-2

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iii.

  	
   

  	
  Class A-3

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iv.

  	
   

  	
  Class A-4

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  v.

  	
   

  	
  Class A-5

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  

 

10.
Distributions of Interest per $1,000 of Original Principal Amount as of Current
Distribution date:

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Original Principal

  [A]

  	
   

  	
  Outstanding Balance

  [B]

  	
   

  	
  Principal Payment

  [C]

  	
   

  	
  Principal Payment

  per $1,000 of

  Orig. Principal

  Amt.

  [C/A x 1,000]

  	
   

  
	
   

  	
  i.

  	
   

  	
  Class A-1

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
   

  	
  Class A-2

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iii.

  	
   

  	
  Class A-3

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  iv.

  	
   

  	
  Class A-4

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  v.

  	
   

  	
  Class A-5

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  

 

11. Trigger for Mandatory Routine
Quarterly DRC True-Up Filings

 

	
   

  	
  i.

  	
   

  	
  Scheduled Energy Recovery Bond Principal Balance

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
  ii.

  	
   

  	
  Difference [(11.i. - 5.ix.) / 11.i. x 100]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0.00%

  	
   

  
	
   

  	
  iii.

  	
   

  	
  Variance Trigger Level

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  5.00%

  	
   

  
	
   

  	
  iv.

  	
   

  	
  Quarterly True-Up Required?

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  NO

  	
   

  

 

B-3

 

IN WITNESS HEREOF, the undersigned has duly executed and delivered this
Quarterly Servicer’s Certificate this   [
]        day of [ ] .

 

PACIFIC GAS AND ELECTRIC
COMPANY, as Servicer

 

	
  by: 

  	
   

  	
   

  
	
  Authorized
  Signatory

  

 

B-4

 

EXHIBIT
C

 

FORM OF MONTHLY
SERVICER’S CERTIFICATE

 

Monthly
Servicer’s Certificate

 

PG&E
Energy Recovery Funding LLC

$1,887,864,000 Energy Recovery Bonds, Series 2005-1

 

Pursuant to
Section 3.01(b)(i) of the Recovery Property Servicing Agreement dated as of
February 10, 2005 (the “Agreement”) between Pacific Gas and Electric Company,
as Servicer and PG&E Energy Recovery Funding LLC, as Issuer, the Servicer
does hereby certify as follows:

 

Capitalized terms
used in this Monthly Servicer’s Certificate have the respective meanings as set
forth in the Agreement, including Annex I.

 

Collection Period:
xxx

 

	
  Line No.

  	
   

  	
  BILLED REVENUE SUMMARY

  	
   

  	
   

  
	
  1

  	
   

  	
   

  	
  Current Monthly Billing
  Period

  	
  xxx

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
   

  	
  Non-exempt consumers -
  KWh billed (pre-true-up)

  	
   

  	
  Revenue
  Rept.

  
	
  3

  	
   

  	
   

  	
  Non-exempt consumers -
  KWh billed (current rate)

  	
   

  	
  Revenue
  Rept.

  
	
  4

  	
   

  	
   

  	
  Non-exempt consumers -
  cents per KWh DRC Charge (pre-true-up)

  	
   

  	
  Revenue
  Rept.

  
	
  5

  	
   

  	
   

  	
  Non-exempt consumers -
  cents per KWh DRC Charge (current rate)

  	
   

  	
  Revenue
  Rept.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
   

  	
  Current period Billed
  DRC Revenues

  	
   

  	
  (Ln.2*Ln.4)+(Ln.3*Ln.5)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
   

  	
  DRC revenues not
  accounted for in prior periods

  	
   

  	
  Revenue
  Rept.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
   

  	
  Gas & Electric net
  write-offs as% of Gas & Electric billed revenues

  	
   

  	
  Revenue
  Rept.

  

 

DRC
REVENUES REMITTED TO COLLECTION ACCOUNT

 

Monthly
Remittance Percentages

 

	
  Line

  No.

  	
   

  	
   

  	
   

  	
  30 Days

  	
   

  	
  60 Days

  	
   

  	
  90 Days

  	
   

  	
  120 Days

  	
   

  	
  150 Days

  	
   

  	
  180 Days

  	
   

  	
  Total

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Billed
  DRC Rev

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  	
   

  	
  xxx

  
	
  2

  	
   

  	
  [current
  mo.]

  	
   

  	
  xxx

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  [1 mo.
  prior]

  	
   

  	
   

  	
   

  	
  xxx

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  [2
  mos. prior]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  xxx

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  [3
  mos. prior]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  xxx

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  [4
  mos. prior]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  xxx

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  [5
  mos. prior]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  xxx

  	
   

  	
   

  
	
  8

  	
   

  	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  xxx

  

 

C-1

 

	
   

  	
   

  	
  Write-off
  Reconciliation

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  [Mo.]
  Period Billed DRC Revenues

  	
   

  	
  Ln.7
  (Billed DRC Rev Col.)

  	
   

  
	
  10

  	
   

  	
  [Mo.]
  Period DRC Revenue Net Write-off

  	
   

  	
  Ln.9*Ln.8(p.1)

  	
   

  
	
  11

  	
   

  	
  [Mo.]
  Period Net DRC Revenues

  	
   

  	
  Ln.9-Ln.10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  Amount Previously
  Remitted to Collection Account

  	
   

  	
  Ln.9*Ln.1
  (Total Col.)

  	
   

  
	
  13

  	
   

  	
  Write-off Adjustment

  	
   

  	
  Ln.11-Ln.12

  	
   

  
	
  14

  	
   

  	
  Total Net DRC
  Remittance Amount

  	
   

  	
  Ln.8
  — Ln.13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Aggregate
  Remittance Amount

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  DRC
  revenues not accounted for in prior periods

  	
   

  	
  Ln.7
  (p.1)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
  Aggregate
  DRC Remittances for [Mo.] Billing Period

  	
   

  	
  Ln.14
  + Ln. 15

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
  Aggregate
  DRC Daily Remittances for [Mo.} Billing Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18

  	
   

  	
  True
  up Difference to be added or refunded in next daily payment

  	
   

  	
  Ln 16
  — Ln 17

  	
   

  

 

IN WITNESS HEREOF, the undersigned has duly executed
and delivered this Monthly Servicer’s Certificate this xxx day of xxx.

 

	
  PACIFIC GAS AND
  ELECTRIC COMPANY, as Servicer

  
	
   

  
	
  by:

  	
   

  	
   

  
	
  Authorized Signatory

  

 

C-2

 

EXHIBIT
D

 

FORM OF DAILY
SERVICER’S CERTIFICATE

 

Daily
Servicer’s Certificate

 

PG&E
Energy Recovery Funding LLC

$1,887,864,000 Energy Recovery Bonds, Series 2005-1

 

Pursuant to
Section 3.01(b)(ii) of the Recovery Property Servicing Agreement dated as of
February 10, 2005 (the “Agreement”) between Pacific Gas and Electric Company,
as Servicer and PG&E Energy Recovery Funding LLC, as Issuer, the Servicer
does hereby certify as follows:

 

Capitalized terms
used in the Daily Servicer’s Certificate have the respective meanings as set
forth in the Agreement, including Annex I.

 

Collection Period:
xxx

 

	
  Line

  No.

  	
   

  	
  BILLED REVENUE SUMMARY

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
   

  	
  Current daily billing
  period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
   

  	
  Non-exempt consumers -
  KWh billed (pre-true-up)

  	
   

  	
  Revenue
  Rept.

  	
   

  
	
  11

  	
   

  	
   

  	
  Non-exempt consumers -
  KWh billed (current rate)

  	
   

  	
  Revenue
  Rept.

  	
   

  
	
  12

  	
   

  	
   

  	
  Non-exempt consumers -
  cents per KWh DRC Charge (pre-true-up)

  	
   

  	
  Revenue
  Rept.

  	
   

  
	
  13

  	
   

  	
   

  	
  Non-exempt consumers -
  cents per KWh DRC Charge (current rate)

  	
   

  	
  Revenue
  Rept.

  	
   

  
	
  14

  	
   

  	
   

  	
  Current period Billed
  DRC Revenues

  	
   

  	
  (Ln.2*Ln.4)+(Ln.3*Ln.5)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
   

  	
  Aggregate DRC Daily
  Remittance for xxx period

  	
   

  	
  Ln. 6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
   

  	
  Total month-to-date DRC
  Daily Remittances excluding true up

  	
   

  	
   

  	
   

  

 

IN WITNESS HEREOF, the undersigned has duly executed
and delivered this Daily Servicer’s Certificate this xxx day of xxx.

 

	
  PACIFIC GAS AND
  ELECTRIC COMPANY, as Servicer

  
	
   

  
	
   

  
	
  by:

  	
   

  	
   

  
	
  Authorized Signatory

  

 

D-1

 

EXHIBIT
E

 

FORM OF DRC CHARGE
TRUE-UP MECHANISM ADVICE FILING

 

[date]

 

Advice              -E

(Pacific Gas and
Electric Company ID U 39 M)

 

Public Utilities
Commission of the State of California

 

	
  Subject:

  	
  Routine Annual [Quarterly] Advice Filing
  for Dedicated Rate Component True-up Mechanism

  

 

Pursuant to California
Public Utilities Commission (CPUC) Decision (D.) 04-11-015 (Decision), Pacific
Gas and Electric Company (PG&E), as servicer of the Energy Recovery Bonds
(ERBs) and on behalf of PG&E Energy Recovery Funding LLC (PERF), hereby
applies for adjustment to the Dedicated Rate Component (DRC) charge for series
2005-1, class(es)                   of
the ERBs.

 

Purpose

 

This filing establishes
revised DRC charges for rate schedules for non-exempt consumers, as set forth
in D.04-11-015.

 

Background

 

In D.03-12-035, which
approved the plan for PG&E’s emergence from bankruptcy, the Commission
established a Regulatory Asset pertaining to PG&E liabilities incurred on
behalf of its electric ratepayers during the power crisis of 2000 to 2001.  The purpose of the Regulatory Asset, along
with the other provisions of the bankruptcy-emergence plan approved by the
Commission, was to enhance PG&E’s fiscal soundness and allow it to emerge
from bankruptcy as a creditworthy entity. 
In D.04-11-015, the Commission granted PG&E authority to issue ERBs
to refinance the Regulatory Asset and associated federal and state income and
franchise taxes, and consequently to reduce PG&E’s electric rates.

 

ERBs are an asset backed
security; investors will rely on the cash flows generated by a specific asset
that was sold by PG&E to PERF, a Special Purpose Entity that issued the
bonds secured by this asset.  The asset
that was sold is Recovery Property, a current property right that was created
by Senate Bill 772 as a right to receive future revenues

 

E-1

 

from a non-bypassable
customer charge (a Dedicated Rate Component or DRC charge) that will cover debt
service and all related ERB costs.

 

In D.04-11-015, the
Commission authorized PG&E to file Routine True-up Mechanism Advice Letters
at least annually, and not more than quarterly, at least 15 days before the end
of the calendar year for the annual filings and at least 15 days before the end
of the quarter for the quarterly filings. 
These filings are intended to ensure that the actual revenues collected
under the DRC charge are neither more nor less than those required to repay the
ERBs as scheduled.  Routine True-up
Mechanism Advice Letter filings are those where PG&E uses the method found
reasonable by the Commission in D.04-11-015 to revise existing DRC charges.

 

Using the method approved
by the Commission in D.04-11-015, this filing modifies the variables used in
the DRC charge calculations and provides the resulting modified DRC charges.

 

Table I shows the revised
assumptions for each of the variables used in calculating the DRC charges for
non-exempt consumers.  The assumptions
underlying the initial DRC charges were filed in Advice 2626-E, an Issuance
Advice Letter, as authorized by D.04-11-015. 
Attachment 1 shows the revised payment schedule.

 

TABLE
I

Input Values For Revised DRC Charges

 

	
  Average monthly kWh
  sales to non-exempt consumers

  	
   

  
	
  Percent of revenue
  requirement allocated to non-exempt consumers

  	
   

  
	
  Percent of non-exempt
  consumers’ revenue written off

  	
   

  
	
  Percent of non-exempt
  consumers’ billed amounts expected to be uncollected

  	
   

  
	
  Percent of billed
  amounts collected in current month

  	
   

  
	
  Percent of billed
  amounts collected in second month after billing

  	
   

  
	
  Percent of billed
  amounts collected in third month after billing

  	
   

  
	
  Percent of billed
  amounts collected in fourth month after billing

  	
   

  
	
  Percent of billed
  amounts collected in fifth month after billing

  	
   

  
	
  Percent of billed
  amounts collected in sixth month after billing

  	
   

  
	
  Percent of billed
  amounts remaining less uncollectibles

  	
   

  
	
  Monthly ongoing
  transaction expenses

  	
   

  
	
  Expected ERB Series
  2005-1 outstanding balance as of    /   /   

  	
   

  
	
  Over- or
  undercollection of principal from previous DRC collections to be reflected in
  the new DRC charges

  	
   

  

 

E-2

 

Table 2 shows the revised
DRC charges(1) calculated for non-exempt consumers.  The DRC charge calculations are shown in
Attachment 2.

TABLE
2

 

	
  Non-exempt Consumer DRC
  Charge

  	
   

  	
  ¢/kWh

  
	
  Non-exempt Consumer DRC
  Charge

  	
   

  	
  ¢/kWh

  

 

Attachment 3 includes
proposed changes to Part I of PG&E’s Preliminary Statement to show DRC
charges to be effective January 1, [or month, if quarterly Advice][year].

 

Description of Attachments

 

Attachment 1 to this advice filing presents the revised principal
amortization schedule for the DRC charges, applying the cash flow model
specified in Appendix A of A.04-07-032, as modified by D.04-11-015.

 

Attachment 2 presents the revised DRC charge
calculations.

 

Attachment 3 provides proposed changes to Part I of
PG&E’s Preliminary Statement.

 

Effective Date

 

[If annual Routine
Advice]

 

In accordance with
D.04-11-015, Routine True-Up Mechanism Advice Letters for required annual DRC
charge adjustments shall be filed at least 15 days before the end of each calendar
year and these adjustments to DRC charges shall be effective at the beginning
of the next calendar year.  No Commission
resolution is required.  Therefore, these
DRC charges shall be effective January 1, [year] through December 31, [year],
unless they are changed by a quarterly adjustment prior to December 31, [year].

 

[If quarterly Routine
Advice]

 

(1) There should be only a single DRC charge, except possibly in
connection with (i) new municipal loads, (ii) departing municipal loads, and
(iii) in certain unexpected situations, non-exempt consumers whose electric
rates are capped.

 

E-3

 

In accordance with
D.04-11-015, Routine True-Up Mechanism Advice Letters for quarterly DRC charge
adjustments shall be filed at least 15 days before the end of each quarter and
these adjustments to DRC charges shall be effective at the beginning of the
next quarter.  No Commission resolution
is required.  Therefore, these DRC
charges shall be effective [month] 1, [year] through December 31, [year],
unless they are changed by a quarterly adjustment prior to December 31, [year].

 

Protests

 

Anyone wishing to protest
this filing may do so by sending a letter by                ,
which is         days from the date of this
filing.  The protest must state the
grounds upon which it is based, including such items as financial and service
impact, and should be submitted expeditiously. 
Protests should be mailed to:

 

IMC Branch Chief –
Energy Division

California Public
Utilities Commission

505 Van Ness
Avenue, 4th Floor

San Francisco,
California 94102

Facsimile: (415)
703-2200

E-mail:
jjr@cpuc.ca.gov

 

Protests also should be
sent by e-mail and facsimile to Mr. Jerry Royer, Energy Division, as shown
above, and by U.S. mail to Mr. Royer at the above address.

 

The protest should be
sent via both e-mail and facsimile to PG&E on the same date it is mailed or
delivered to the Commission at the address shown below.

 

Pacific Gas and
Electric Company

Attention: Brian Cherry

Director, Regulatory
Relations

77 Beale Street, Mail
Code B10C

P.O. Box 770000

San Francisco, California
94177

Facsimile: (415) 973-7226

E-mail: RxDd@pge.comNotice

 

In accordance with General Order 96-A, Section III,
Paragraph G, a copy of this advice letter is being sent electronically and via
U.S. mail to parties shown on the attached list.  Address changes should be directed to Rose De
La Torre at (415) 973-4716 (RxDd@pge.com). 
Advice letter filings can also be accessed electronically at:

 

http://www.pge.com/tariffs

 

Director -
Regulatory Relations

Attachments

cc:           Service List for
A.04-07-032.

 

E-4

 

Attachment 1

 

Revised Expected Principal Amount Amortization

Series 2005-1, Class        

 

E-5

 

Attachment 2

Amounts Receivable And Expected Principal Amount Amortization

 

The
remaining total amount payable to the owner of the Recovery Property, or its
assignee(s), is a $      principal amount, plus
interest on such principal amount, plus a $      
overcollateralization amount, plus other ongoing costs, to be obtained from DRC
charges calculated in accordance with D.04-11-015.

 

The
DRC charges shall be adjusted from time to time, at least annually, via the DRC
Charge True-Up Mechanism in accordance with D.04-11-015.

 

The
following pages show the amounts scheduled to be paid by the Trustee from DRC
charge revenues it has received.  These
payment amounts include principal plus interest, overcollateralization, and
other ongoing costs.

 

E-6

 

EXHIBIT
F

 

FORM OF
ANNIVERSARY DRC CHARGE TRUE-UP MECHANISM ADVICE FILING

 

[date]

 

Advice              -E

(Pacific Gas and
Electric Company ID U 39 M)

 

Public Utilities
Commission of the State of California

 

Subject:                                                   Anniversary
Advice Filing for Dedicated Rate Component True-up Mechanism

 

Pursuant to California
Public Utilities Commission (CPUC) Decision (D.) 04-11-015 (Decision), Pacific
Gas and Electric Company (PG&E), as servicer of the Energy Recovery Bonds
(ERBs) and on behalf of PG&E Energy Recovery Funding LLC (PERF), hereby
files its Anniversary True-up Advice.

 

[if, as expected, no rate
change is necessary]  As is anticipated
in D. 04-11-015, no true-up of the Dedicated Rate Component (DRC) charge is
necessary at this time given the annual and quarterly Routine True-up
Mechanism.

 

[if a DRC rate change is
necessary].  Pursuant to D. 04-11-015,
PG&E applies for adjustment to the Dedicated Rate Component (DRC) charge
for series 2005-1, class(es)              of
the ERBs.

 

Purpose

 

This filing satisfies the
statutory requirement, discussed in D. 04-11-015, that requires the Commission
to determine, on each anniversary of D. 04-11-015, whether the DRC charge needs
to be modified.

 

[if a DRC rate change is
necessary]  This filing establishes
revised DRC charges for rate schedules for non-exempt consumers, as set forth
in D.04-11-015.

 

Background

 

In D.03-12-035, which
approved the plan for PG&E’s emergence from bankruptcy, the Commission
established a Regulatory Asset pertaining to PG&E liabilities incurred on
behalf of its electric ratepayers during the power crisis of 2000 to 2001.  The purpose of the Regulatory Asset, along
with the other provisions of the bankruptcy-emergence plan

 

F-1

 

approved by the
Commission, was to enhance PG&E’s fiscal soundness and allow it to emerge
from bankruptcy as a creditworthy entity. 
In D.04-11-015, the Commission granted PG&E authority to issue ERBs
to refinance the Regulatory Asset and associated federal and state income and
franchise taxes, and consequently to reduce PG&E’s electric rates.

 

ERBs are an asset backed
security; investors will rely on the cash flows generated by a specific asset
that was sold by PG&E to PERF, a Special Purpose Entity that issued the
bonds secured by this asset.  The asset
that was sold is Recovery Property, a current property right that was created
by Senate Bill 772 (the enabling legislation for the ERB transaction),
D.04-11-015 and Advice 2626-E (an Issuance Advice Letter, as authorized by
D.04-11-015) as a right to receive future revenues from a non-bypassable charge
(a Dedicated Rate Component or DRC charge) on consumers of electricity in
PG&E’s service territory.  The DRC
charge will cover debt service and all related ERB costs.

 

In D.04-11-015, the
Commission authorized PG&E to file Routine True-up Mechanism Advice Letters
at least annually, and not more than quarterly, at least 15 days before the end
of the calendar year for the annual filings and at least 15 days before the end
of the quarter for the quarterly filings. 
These filings are intended to ensure that the actual revenues collected
and remitted to the ERB trustee under the DRC charge are neither more nor less
than those required to repay the ERBs as scheduled.  Routine True-up Mechanism Advice Letter
filings are those where PG&E uses the method found reasonable by the
Commission in D.04-11-015 to revise existing DRC charges.

 

D. 04-11-015 also notes
that Section 848.1(i) of the Public Utilities Code, added by Senate Bill 772
requires the Commission to determine on each anniversary of D. 04-11-015
whether the DRC needs to be adjusted.

 

[if a DRC rate change is
necessary.  If, as expected, no rate
change is necessary, then everything up to the “Protest” section, as well as
indicated attachments, is omitted]  Using
the method approved by the Commission in D.04-11-015, this filing modifies the
variables used in the DRC charge calculations and provides the resulting modified
DRC charges.

 

Table I shows the revised
assumptions for each of the variables used in calculating the DRC charges for
non-exempt consumers.  The assumptions
underlying the initial DRC charges were filed in Advice 2626-E.  Attachment 1 shows the revised payment schedule.

 

F-2

 

TABLE
I

Input Values For Revised DRC Charges

 

	
  Average monthly kWh sales to non-exempt
  consumers

  	
   

  
	
  Percent of revenue requirement allocated to
  non-exempt consumers

  	
   

  
	
  Percent of non-exempt consumers’ revenue
  written off

  	
   

  
	
  Percent of non-exempt consumers’ billed
  amounts expected to be uncollected

  	
   

  
	
  Percent of billed amounts collected in
  current month

  	
   

  
	
  Percent of billed amounts collected in
  second month after billing

  	
   

  
	
  Percent of billed amounts collected in
  third month after billing

  	
   

  
	
  Percent of billed amounts collected in
  fourth month after billing

  	
   

  
	
  Percent of billed amounts collected in
  fifth month after billing

  	
   

  
	
  Percent of billed amounts collected in
  sixth month after billing

  	
   

  
	
  Percent of billed amounts remaining less
  uncollectibles

  	
   

  
	
  Monthly ongoing transaction expenses

  	
   

  
	
  Expected ERB Series 2005-1 outstanding
  balance as of
        /      
  /      

  	
   

  
	
  Over- or undercollection of principal from
  previous DRC collections to be reflected in the new DRC charges

  	
   

  

 

Table 2 shows the revised DRC charges(1) calculated for non-exempt consumers.  The DRC charge calculations are shown in
Attachment 2.

 

TABLE
2

 

	
  Non-exempt Consumer DRC Charge

  	
   

  	
  ¢/kWh

  
	
  Non-exempt Consumer DRC Charge

  	
   

  	
  ¢/kWh

  

 

Attachment 3 includes proposed changes to
Part I of PG&E’s Preliminary Statement to show DRC charges to be effective January 1,
[or month, if quarterly Advice][year].

 

Description of
Attachments

 

Attachment 1 to this advice filing presents
the revised principal amortization schedule for the DRC charges, applying
the cash flow model specified in Appendix A of
A.04-07-032, as modified by D.04-11-015.

 

Attachment 2 presents the revised DRC charge
calculations.

 

(1) There should be only a single DRC charge, except possibly in
connection with (i) new municipal loads, (ii) departing municipal loads, and
(iii) in certain unexpected situations, non-exempt consumers whose electric
rates are capped.

 

F-3

 

Attachment 3 provides proposed changes to
Part I of PG&E’s Preliminary Statement.

 

Effective Date

 

In accordance with D.04-11-015 and consistent
with statute, the DRC charge adjustments set forth in this Anniversary  True-Up Mechanism Advice shall be effective
90 days after the upcoming anniversary of D. 04-11-015.  Therefore, these DRC charges shall be
effective [date] through December 31, [year], unless they are changed by a
quarterly adjustment prior to December 31, [year].

 

Protests

 

Anyone wishing to protest this filing may do so by sending a letter by                         ,
which is          days from the date of
this filing.  The protest must state the
grounds upon which it is based, including such items as financial and service
impact, and should be submitted expeditiously. 
Protests should be mailed to:

 

IMC Branch Chief – Energy Division

California Public Utilities Commission

505 Van Ness Avenue, 4th Floor

San Francisco, California 94102

Facsimile: (415) 703-2200

E-mail: jjr@cpuc.ca.gov

 

Protests also should be sent by e-mail and facsimile to Mr. Jerry
Royer, Energy Division, as shown above, and by U.S. mail to Mr. Royer at the
above address.

 

The protest should be sent via both e-mail and facsimile to PG&E on
the same date it is mailed or delivered to the Commission at the address shown
below.

 

Pacific Gas
and Electric Company

Attention: Brian Cherry

Director, Regulatory Relations

77 Beale Street, Mail Code B10C

P.O. Box 770000

San Francisco, California 94177

Facsimile: (415) 973-7226

E-mail: RxDd@pge.comNotice

 

In accordance with General Order 96-A, Section III,
Paragraph G, a copy of this

 

F-4

 

advice
letter is being sent electronically and via U.S. mail to parties shown on the
attached list.  Address changes should be
directed to Rose De La Torre at (415) 973-4716 (RxDd@pge.com).  Advice letter filings can also be accessed
electronically at:

 

http://www.pge.com/tariffs

 

Director
- Regulatory Relations

 

Attachments

 

cc:         Service List for
A.04-07-032.

 

F-5

 

Attachment 1

 

Revised Expected Principal Amount
Amortization

Series 2005-1, Class          

 

F-6

 

Attachment 2

Amounts Receivable And Expected Principal
Amount Amortization

 

The remaining
total amount payable to the owner of the Recovery Property, or its assignee(s),
is a $           principal
amount, plus interest on such principal amount, plus a $         
overcollateralization amount, plus other ongoing costs, to be obtained from DRC
charges calculated in accordance with D.04-11-015.

 

The DRC charges
shall be adjusted from time to time, at least annually, via the DRC Charge
True-Up Mechanism in accordance with D.04-11-015.

 

The following
pages show the amounts scheduled to be paid by the Trustee from DRC charge
revenues it has received.  These payment
amounts include principal plus interest, overcollateralization, and other
ongoing costs.

 

F-7

 

EXHIBIT G

 

EXPECTED AMORTIZATION SCHEDULE FOR
SERIES 2005-1

 

	
  $

  Payment Date

  	
   

  	
  Class A-1 Balance

  	
   

  	
  Class A-2 Balance

  	
   

  	
  Class A-3 Balance

  	
   

  	
  Class A-4 Balance

  	
   

  	
  Class A-5 Balance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Closing Date

  	
   

  	
  268,000,000

  	
   

  	
  647,000,000

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  06/25/05

  	
   

  	
  253,672,239

  	
   

  	
  647,000,000

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  09/25/05

  	
   

  	
  191,354,378

  	
   

  	
  647,000,000

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  12/25/05

  	
   

  	
  127,972,390

  	
   

  	
  647,000,000

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  03/25/06

  	
   

  	
  71,463,317

  	
   

  	
  647,000,000

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  06/25/06

  	
   

  	
  22,002,837

  	
   

  	
  647,000,000

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  09/25/06

  	
   

  	
  0

  	
   

  	
  610,651,145

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  12/25/06

  	
   

  	
  0

  	
   

  	
  553,644,681

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  03/25/07

  	
   

  	
  0

  	
   

  	
  499,124,603

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  06/25/07

  	
   

  	
  0

  	
   

  	
  446,693,214

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  09/25/07

  	
   

  	
  0

  	
   

  	
  384,684,147

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  12/25/07

  	
   

  	
  0

  	
   

  	
  324,020,926

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  03/25/08

  	
   

  	
  0

  	
   

  	
  266,525,556

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  06/25/08

  	
   

  	
  0

  	
   

  	
  212,018,305

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  09/25/08

  	
   

  	
  0

  	
   

  	
  148,035,702

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  12/25/08

  	
   

  	
  0

  	
   

  	
  85,365,112

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  03/25/09

  	
   

  	
  0

  	
   

  	
  25,630,899

  	
   

  	
  320,000,000

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  06/25/09

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  288,758,553

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  09/25/09

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  222,386,872

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  12/25/09

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  157,252,479

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  03/25/10

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  94,936,586

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  06/25/10

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  35,490,418

  	
   

  	
  468,000,000

  	
   

  	
  184,864,000

  	
   

  
	
  09/25/10

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  434,534,010

  	
   

  	
  184,864,000

  	
   

  
	
  12/25/10

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  366,763,472

  	
   

  	
  184,864,000

  	
   

  
	
  03/25/11

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  301,686,938

  	
   

  	
  184,864,000

  	
   

  
	
  06/25/11

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  239,441,761

  	
   

  	
  184,864,000

  	
   

  
	
  09/25/11

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  167,635,746

  	
   

  	
  184,864,000

  	
   

  
	
  12/25/11

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  96,961,141

  	
   

  	
  184,864,000

  	
   

  
	
  03/25/12

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  28,896,551

  	
   

  	
  184,864,000

  	
   

  
	
  06/25/12

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  148,543,764

  	
   

  
	
  09/25/12

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  73,742,437

  	
   

  
	
  12/25/12

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  

 

G-1

 

ANNEX I

 

to

 

SERVICING
AGREEMENT

 

The Servicer agrees to comply with the following
servicing procedures:

 

SECTION 1.                            Definitions.

 

Whenever
used in this Annex I, the following words and phrases shall have the
following meanings:

 

“Aggregate Monthly Remittance Amount” has the
meaning set forth in Section 6(e)(i) of this
Annex I.

 

“Billed DRC Revenues” means the amounts billed
to Consumers pursuant to the DRC Charges (other than billed amounts that would
result in Retained Collections), whether billed directly to such Consumers by
the Servicer or indirectly through an ESP pursuant to Consolidated ESP Billing.

 

“Consolidated ESP Billing” means the billing
procedures pursuant to which an ESP will be responsible for billing and
collecting all charges to Consumers served by such ESP, including the DRC
Charges, and will become obligated to the Servicer for such Billed DRC
Revenues, all in accordance with applicable CPUC Regulations.  Unless the context indicates otherwise, the
term Consolidated ESP Billing includes Full Consolidated ESP Billing.

 

“Estimation Template” means the template shown
on Attachment A to this Annex I, which template is used to calculate the
DRC Payments estimated to have been received by the Servicer during any
Collection Period.

 

“Full Consolidated ESP Billing” means the
billing procedures pursuant to which an ESP performs the same tasks it would
perform under Consolidated ESP Billing and, in addition, calculates all utility
charges to Consumers it serves, including the DRC Charges, from specific cents
per kilowatt hour rates provided by the Servicer.

 

“Monthly Collections Curve” means the monthly
collections curve as described in Attachment A to this Annex I.

 

“Servicer Policies and Practices” means, with
respect to the Servicer’s duties under this Annex I, the policies and
practices of the Servicer applicable to such duties that the Servicer follows
with respect to comparable assets that it services for itself or others.

 

“Variables” means the following variables
underlying the Monthly Collections Curves:

 

I-1

 

(i)                                     sample sizes for Consumers by customer class (as described
in Attachment A to this Annex I);

 

(ii)                                  tallied number of days recorded between when bills are
generated and when bill payments are received, as described in Table A; and

 

(iii)                               the current Write-off Factor.

 

“Write-off
Factor” means, at any time, the then current write-off factor that the CPUC
has approved with respect to billings of Pacific Gas and Electric Company (“PG&E”).

 

SECTION 2.                            Data Acquisition.

 

(a)                                  Installation
and Maintenance of Meters.  Except to
the extent that an ESP is responsible for such services pursuant to an ESP
Service Agreement, the Servicer shall use its best efforts to cause to be
installed, replaced and maintained meters in such places and in such condition
as will enable the Servicer to obtain usage measurements for each Consumer
every 27-33 days.  If Consumers are
billed by entities other than the Servicer or an ESP, the Servicer shall
request these other entities to bill those Consumers for the DRC Charge and to
remit the DRC Charge revenues to the Servicer on behalf of those
Consumers.  The Servicer shall have no
other responsibility to bill or collect DRC Charges from or in respect of
Consumers billed by entities other than ESPs.

 

(b)                                 Meter
Reading.  At least once each 27-33
days, the Servicer shall use its best efforts to obtain usage measurements for
each Consumer; provided, however, that the Servicer may determine
any Consumer’s usage on the basis of estimates in accordance with applicable
CPUC Regulations and Servicer Policies and Practices; and provided  further
that the Servicer may obtain usage measurements from the Applicable ESP for
Consumers receiving meter reading services from such ESP if the respective ESP
Service Agreement so provides.

 

(c)                                  Cost
of Metering.  The Issuer shall not be
obligated to pay any costs associated with the metering duties set forth in
this Section 2, including, but not limited to, the costs of installing,
replacing and maintaining meters, nor shall the Issuer be entitled to any
credit against the Servicing Fee for any cost savings realized by the Servicer
or any ESP as a result of new metering and/or billing technologies.

 

SECTION 3.                            Usage and Bill Calculation.

 

The Servicer shall use its best efforts to obtain a
calculation of each Consumer’s usage (which may be based on data obtained from
such Consumer’s meter read or on usage estimates determined in accordance with
the Servicer Policies and Practices and applicable CPUC Regulations) once every
27 to 33 days and shall determine therefrom each Consumer’s individual DRC
Charge to be included on such Consumer’s Bill; provided, however,
that in the case of Consumers served by an ESP under Full Consolidated ESP
Billing, the Applicable ESP, rather than the Servicer, shall determine such
Consumers’ total DRC Charges to be included on such Consumers’ Bills based on
specific DRC Charges (cents per kilowatt hour rates) provided by the Servicer,
and the Servicer shall deliver to the Applicable ESPs such specific cents per
kilowatt hour rates as are necessary for the Applicable ESPs to calculate such
Consumers’

 

I-2

 

respective
DRC Charges as such charges may change from time to time pursuant to the
True-Up Adjustments.

 

SECTION 4.                            Billing.

 

The Servicer shall implement the DRC Charges as of the
DRC Effective Date and shall thereafter bill each Consumer or the Applicable
ESP for the respective Consumer’s outstanding current and past due DRC Charges
accruing through the DRC Termination Date, all in accordance with the
following:

 

(a)                                  Frequency
of Bills; Billing Practices.  In
accordance with the Servicer’s then-existing Servicer Policies and Practices
for its own charges, as such Servicer Policies and Practices may be modified
from time to time, the Servicer shall generate and issue a Bill to each
Consumer, or, in the case of a Consumer subject to Consolidated ESP Billing, to
the Applicable ESP, with respect to such Consumer’s respective DRC Charge once
every 27 to 33 days, at the same time, with the same frequency and on the same
Bill as that containing the Servicer’s own charges to such Consumer or ESP, as
the case may be.  In the event that the
Servicer makes any material modification to its Servicer Policies and Practices
for its own charges, it shall notify the Issuer, the Trustee, the CPUC and the
Rating Agencies as soon as practicable, and in no event later than 60 Business
Days after such modification goes into effect; provided, however,
that the Servicer may not make any modification that will materially adversely
affect the Bondholders.

 

(b)                                 Format.  The Servicer shall conform to such
requirements regarding the format, structure and text of Bills delivered to
Consumers and ESPs as this Agreement, the Financing Order, the PU Code and
applicable CPUC Regulations shall from time to time prescribe.  To the extent that Bill format, structure and
text are not prescribed by the this Agreement, the Financing Order, the PU Code
or by applicable CPUC Regulations, the Servicer shall determine the format,
structure and text of all Bills in accordance with its reasonable business
judgment, its Servicer Policies and Practices with respect to its own charges
and prevailing industry standards.

 

(c)                                  Delivery.  The Servicer shall deliver all Bills to
Consumers (i) by United States Mail in such class or classes as are consistent
with the Servicer Policies and Practices followed by the Servicer with respect
to its own charges to its customers or (ii) by any other means, whether
electronic or otherwise, that the Servicer may from time to time use to present
its own charges to its customers.  In the
case of Consumers that are subject to Consolidated ESP Billing, the Servicer
shall deliver all Bills or charges to the Applicable ESPs by such means as are
mutually agreed upon by the Servicer and the Applicable ESP and are consistent
with CPUC Regulations.  The Servicer or
an ESP, as applicable, shall pay from its own funds all costs of issuance and
delivery of all Bills, including but not limited to printing and postage costs
as the same may increase or decrease from time to time.

 

SECTION 5.                            Consumer Service Functions.

 

The Servicer shall handle all Consumer inquiries and
other Consumer service matters according to the same procedures it uses to
service customers with respect to its own charges.

 

I-3

 

SECTION 6.                            Collections; Payment Processing; Remittance.

 

(a)                                  Collection
Efforts, Policies, Procedures.

 

(i)                                     The
Servicer shall use reasonable efforts to collect all Billed DRC Revenues from
Consumers and ESPs as and when the same become due and shall follow such
collection procedures as it follows with respect to comparable assets that it
services for itself or others, including with respect to the following:

 

(A)                                                      The
Servicer shall prepare and deliver overdue notices to Consumers and ESPs in
accordance with applicable CPUC Regulations and Servicer Policies and
Practices.

 

(B)                                                        The
Servicer shall assess late payment charges, if any, on outstanding ESP balances
in accordance with applicable CPUC Regulations. 
All late payment charges, to the extent available, and interest
collected shall be payable to and retained by the Servicer as a component of
its compensation under the Agreement, and the Issuer shall have no right to
share in the same.

 

(C)                                                        The
Servicer shall deliver oral and written past-due and shut-off notices in
accordance with applicable CPUC Regulations and Servicer Policies and
Practices.

 

(D)                                                       The
Servicer shall adhere to and carry out disconnection policies and termination
of Consolidated ESP Billing in accordance with PU Code § 779.2, CPUC
Decision 97-10-087, as it may be amended or modified from time to time, and
applicable CPUC Regulations and Servicer Policies and Practices.

 

(E)                                                         The
Servicer may employ the assistance of collection agents in accordance with
applicable CPUC Regulations and Servicer Policies and Practices.

 

(F)                                                         The
Servicer shall apply Consumer and ESP deposits to the payment of delinquent
accounts in accordance with the Financing Order, applicable CPUC Regulations
and Servicer Polices and Practices and according to the priorities set forth in
Section 6(b) of this Annex I.

 

(ii)                                  The
Servicer may in its own discretion waive any late payment charge or any other
fee or charge relating to delinquent payments, if any, and may waive, vary or
modify any terms of payment of any amounts payable by a Consumer, in each case
if such waiver or action: (A) would be in accordance with the Servicer’s
customary practices with respect to comparable assets that it services for
itself and for others; (B) would not materially adversely affect the
rights of the Bondholders; and (C) would comply with applicable law;  provided,

 

I-4

 

however, that
notwithstanding anything in the Agreement or this Annex I to the contrary, the
Servicer is authorized to write off any Billed DRC Revenues in accordance with
its Servicer Policies and Practices.

 

(iii)                               The
Servicer shall accept payment from Consumers in respect of Billed DRC Revenues
in such forms and methods and at such times and places as it accepts for
payment of its own charges.  The Servicer
shall accept payment from ESPs in respect of Billed DRC Revenues in such forms
and methods and at such times and places as the Servicer and each ESP shall
mutually agree in accordance with applicable CPUC Regulations.

 

(b)                                 Payment
Processing.

 

(i)                                     The
Servicer shall post all payments received to Consumer or ESP accounts as
promptly as practicable, and, in any event, substantially all payments shall be
posted no later than two Servicer Business Days after receipt.

 

(ii)                                  The
Servicer shall hold all over-payments for the benefit of the Issuer and other
parties, as applicable, and shall apply such funds to future Bill charges as
such charges become due or refund such over-payments upon request from the
Consumer or Applicable ESP or in accordance with its Servicer Policies and
Practices.

 

(c)                                  Accounts;
Records.  The Servicer shall maintain
accounts and records as to the Recovery Property accurately and in accordance
with its standard accounting procedures and in sufficient detail to permit
reconciliation between collection remittances or recoveries with respect to the
Recovery Property and the amounts from time to time remitted to the Collection
Account in respect of the Recovery Property.

 

(d)                                 Investment
of DRC Payments Received.  Prior to
remittance, the Servicer may invest DRC Payments received at its own risk and
for its own benefit, and such investments and funds shall not be required to be
segregated from the other investments and funds of the Servicer.

 

(e)                                  Calculation
of Collections; Determination of Aggregate Monthly Remittance Amount.

 

(i)                                     On
or before each Monthly Remittance Date, the Servicer shall calculate, in
accordance with Attachment A, the total DRC Payments estimated to have
been received by the Servicer from or on behalf of Consumers during the prior
Collection Period in respect of all previously Billed DRC Revenues, increased
or decreased, as applicable, by (A) the amount of any Remittance Shortfall
calculated for such Monthly Remittance Date or (B) the amount of any Excess
Remittance calculated for such Monthly Remittance Date and (C) Billed DRC
Revenues not accounted for or erroneously accounted for in prior periods
(collectively, the “Aggregate Monthly Remittance Amount”).

 

(ii)                                  At
the end of each year, on or before the Annual Adjustment Date in accordance
with Section 4.01(b)(i)(1) of the Agreement, the Servicer shall update the
Variables underlying the Monthly Collections Curve in Attachment A and
shall revise such curve to reflect the updated Variables.

 

I-5

 

(iii)                               All
calculations of collections, each update of the assumptions used for estimates
and any changes in procedures used to calculate the DRC Payments pursuant to
this Section 6(e) shall be made in good faith and in the case of any
update pursuant to clause (ii) or any change in procedures in a manner
reasonably intended to provide estimates and calculations that are at least as
accurate as those that are provided on the Closing Date utilizing the initial
Variables and procedures.

 

(f)                                    Determination
of Daily Remittance Amounts.

 

(i)                                     During
the first six Collection Periods immediately following the DRC Effective Date,
the amount of each Daily Remittance will be established for each Collection
Period to reflect the gradual increase in collections and shall be calculated
in accordance with Attachment B.

 

(ii)                                  Daily
Remittance amounts after the first six Collection Periods are determined
without regard to the Monthly Collections Curve, but are based on actual Billed
DRC Revenues for each Servicer Business Day, subject to adjustment pursuant to
Sections 6.11(e) and 6.11(f) of the Agreement.

 

(iii)                               If
the Servicer is required to make Daily Remittances pursuant to Section 6.11(d)
of this Agreement, on each Servicer Business Day the Servicer shall make Daily
Remittances equal to total DRC Payments estimated to have been received by the
Servicer on the Servicer Business Day two Servicer Business Days prior to the
Daily Remittance Date.  The estimate of
DRC Payments for any Servicer Business Day shall equal the total amount of
Billed DRC Revenues for that Servicer Business Day and shall be remitted within
two Servicer Business Days.

 

(g)                                 Remittances.

 

(i)                                     The
Issuer shall cause to be established the Collection Account in the name of the
Trustee in accordance with the Indenture.

 

(ii)                                  The
Servicer shall make or cause to be made remittances to the Trustee for deposit
to the Collection Account in accordance with Section 6.11 of the
Agreement.

 

(iii)                               In
the event of any change of account or change of institution affecting the
Collection Account, the Issuer shall provide written notice thereof to the
Servicer by the earlier of: 
(A) five Business Days from the effective date of such change, or
(B) five Business Days prior to the next Monthly Remittance Date.

 

I-6

 

ATTACHMENT A

 

to

 

ANNEX I

 

CALCULATION
OF AGGREGATE MONTHLY REMITTANCE AMOUNT

 

I.                                         PURPOSE OF MONTHLY COLLECTIONS CURVE UNDERLYING
ESTIMATION TEMPLATE DESCRIBED IN SECTION V OF THIS ATTACHMENT A.

 

The purpose of the Monthly Collections Curve
(“Curve”) is to the display the rate at which billed gas and electric revenues
are collected from a sample population representing PG&E’s five retail
customer classes.  Collections
performance is expressed as a percentage measured at each of six consecutive
30-day intervals and represents the ratio of accumulative daily collections to
the total amount billed to the sample customer population.  Collections have been adjusted for write-offs
of uncollectible billed revenues using the applicable Write-off Factor.

 

Since PG&E reads meters and bills
customers once each month on a sequential basis using 21 meter read cycles,
customers likewise remit payments on a sequential basis.  Therefore, the Curve reflects the fact that
customers billed during the later part of a given calendar month will not have
an opportunity to, or may choose not to, remit payment
within the same calendar month.

 

II.                                     FACTS AND ASSUMPTIONS

 

A.                                   The tabulation of historical
daily collections receipts used to generate the Curve is derived from
statistically valid samples of customer accounts billed during a specific study
month.

 

B.                                     These
statistically valid samples represent each of PG&E’s five customer
classes.  Sample sizes are:

 

 

	
  Customer Class

  	
   

  	
  Sample Size

  	
   

  
	
  Residential

  	
   

  	
  0.5

  	
  %

  
	
  Small
  Commercial

  	
   

  	
  0.5

  	
  %

  
	
  Medium
  Commercial

  	
   

  	
  1.0

  	
  %

  
	
  Agricultural

  	
   

  	
  1.0

  	
  %

  
	
  Large
  Commercial

  	
   

  	
  25.0

  	
  %

  

 

C.                                     The
Curve does not vary materially over the course of a year.

 

D.                                    Collections
data used to plot the Curve are weighted to reflect the revenue contribution of
each customer class relative to total billed revenues.

 

I-A-1

 

E.                                      The
Curve reflects the fact that PG&E continues to collect billed revenues
beyond the 180-day collections cycle and includes an adjustment for such
collections based on the applicable Write-off Factor as follows:

 

	
  Write-off Factor

  	
   

  	
  Applies to 180-day collections

  cycles for billing months

  beginning with:

  	
   

  	
  But ending with:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.00200

  	
   

  	
  August 2003

  	
   

  	
  CPUC
  adoption of a new Write-off Factor

  

 

III.                                 DATA
EXTRACTION AND PROCESSING

 

Using the foregoing sample sizes, PG&E
extracts six months of payment data for randomly selected accounts billed
within a specific study month.  Data
associated with accounts signed up under special payment programs, i.e.,
Balanced Payment Plan (BPP) and Automatic Payment Service (APS) are filtered
from the extract before the Curve is plotted. 
Data associated with Consumers receiving electricity from ESPs is
included.

 

Program logic in a PC-based software
application enables PG&E to search its extracted records for an exact match
between the amount billed and a subsequent payment amount.  Where an exact match is found, the number of
days between the billing date and payment date is recorded along with the
payment amount. If an exact payment match is not found, the application records
the number of days between the billing date and the date of each subsequent
partial payment along with the partial payment amount.  The application will repeat this process
until the sum of the partial payments equals or exceeds the original amount
billed.  The number of days between the
billing date and the date of each partial payment, along with the amount of
each partial payment, are recorded separately.

 

Any difference between the total amount
billed and the amount of the accumulative collections on “Day 180” is
considered uncollected.

 

Application output is written to a text file
containing two columns; one lists days 1 through 180, the other shows the sum
total of payments collected for each of the days.  The total amount billed is also included.

 

I-A-2

 

 

IV.                                COLLECTIONS
CURVE

 

 

I-A-3

 

The Curve plots data points at each of six
30-day intervals.  The data used to
generate the curve is contained in its companion Microsoft Excel
spreadsheet.  An understanding of the
spreadsheet methodology can be best be obtained by reviewing the following
explanations:

 

	
  Column

  	
   

  	
  Heading

  	
   

  	
  Explanation

  
	
  A

  	
   

  	
  “Day”

  	
   

  	
  Lists days 1-180 of PG&E’s collections
  cycle.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B

  	
   

  	
  “Daily Revenue Collections”

  	
   

  	
  Records the sum total of daily revenue
  collections associated with bills issued to customers in the sample
  population during a specified calendar month.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C

  	
   

  	
  “Distribute Billed / Uncollected”

  	
   

  	
  These are uncollected revenues at the
  conclusion of PG&E’s 180-day collections cycle that have been adjusted
  for write-off and redistributed uniformly over of the 180-day period. This
  reflects the fact some revenues are recovered beyond PG&E’s 180-day
  collection cycle.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D

  	
   

  	
  “Total B + C”

  	
   

  	
  This is the sum of columns B and C.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E

  	
   

  	
  “Accumulative”

  	
   

  	
  Calculates a rolling total of the daily
  revenues recorded in column D.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F

  	
   

  	
  “% of Total Amt. Billed”

  	
   

  	
  Expresses the accumulative daily
  collections in column E as a percentage of the total revenues billed to the
  sample customer population.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G

  	
   

  	
  “Column F/30”

  	
   

  	
  To reflect PG&E’s serial billing
  practices, this column divides each value in column F by 30 to simulate one
  day’s average collections performance. This is based on the assumption that
  the daily collections pattern is the same for each day of the month and that
  the billed amounts for a given month are spread evenly over each day of the
  month.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H

  	
   

  	
  “Accumulative”

  	
   

  	
  Calculates a rolling total of the daily
  collections performance.

  

 

Table A below summarizes accumulative and net collections performance
at each 30-day interval.  This table is
used to plot the data points on the Curve.

 

TABLE A

 

	
  A

  	
   

  	
  B

  	
   

  	
  C

  	
   

  	
  D

  	
   

  	
  E

  	
   

  	
  F

  	
   

  	
  G

  	
   

  	
  H

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Day

  	
   

  	
  Daily Revenue

  Collections

  	
   

  	
  Distribute Billed /

  Uncollected

  	
   

  	
  Total B + C

  	
   

  	
  Accumulative

  	
   

  	
  % of Total

  Amt. Billed

  	
   

  	
  Column F /

  30

  	
   

  	
  Accumulative

  	
   

  
	
  1

  	
   

  	
  28,801.83

  	
   

  	
  1,175.99

  	
   

  	
  29,977.82

  	
   

  	
  29,977.82

  	
   

  	
  0.93

  	
  %

  	
  0.03

  	
  %

  	
  0.03

  	
  %

  
	
  2

  	
   

  	
  6,056.37

  	
   

  	
  1,175.99

  	
   

  	
  7,232.36

  	
   

  	
  37,210.19

  	
   

  	
  1.15

  	
  %

  	
  0.04

  	
  %

  	
  0.07

  	
  %

  
	
  3

  	
   

  	
  4,701.61

  	
   

  	
  1,175.99

  	
   

  	
  5,877.60

  	
   

  	
  43,087.79

  	
   

  	
  1.33

  	
  %

  	
  0.04

  	
  %

  	
  0.11

  	
  %

  
	
  4

  	
   

  	
  7,072.68

  	
   

  	
  1,175.99

  	
   

  	
  8,248.67

  	
   

  	
  51,336.47

  	
   

  	
  1.59

  	
  %

  	
  0.05

  	
  %

  	
  0.17

  	
  %

  
	
  5

  	
   

  	
  9,438.97

  	
   

  	
  1,175.99

  	
   

  	
  10,614.96

  	
   

  	
  61,951.43

  	
   

  	
  1.92

  	
  %

  	
  0.06

  	
  %

  	
  0.23

  	
  %

  
	
  6

  	
   

  	
  22,439.37

  	
   

  	
  1,175.99

  	
   

  	
  23,615.36

  	
   

  	
  85,566.80

  	
   

  	
  2.65

  	
  %

  	
  0.09

  	
  %

  	
  0.32

  	
  %

  
	
  7

  	
   

  	
  73,692.14

  	
   

  	
  1,175.99

  	
   

  	
  74,868.13

  	
   

  	
  160,434.93

  	
   

  	
  4.97

  	
  %

  	
  0.17

  	
  %

  	
  0.48

  	
  %

  
	
  8

  	
   

  	
  72,747.11

  	
   

  	
  1,175.99

  	
   

  	
  73,923.10

  	
   

  	
  234,358.04

  	
   

  	
  7.25

  	
  %

  	
  0.24

  	
  %

  	
  0.73

  	
  %

  
	
  9

  	
   

  	
  46,888.43

  	
   

  	
  1,175.99

  	
   

  	
  48,064.42

  	
   

  	
  282,422.46

  	
   

  	
  8.74

  	
  %

  	
  0.29

  	
  %

  	
  1.02

  	
  %

  
	
  10

  	
   

  	
  72,223.32

  	
   

  	
  1,175.99

  	
   

  	
  73,399.31

  	
   

  	
  355,821.78

  	
   

  	
  11.01

  	
  %

  	
  0.37

  	
  %

  	
  1.38

  	
  %

  
	
  11

  	
   

  	
  121,787.43

  	
   

  	
  1,175.99

  	
   

  	
  122,963.42

  	
   

  	
  478,785.20

  	
   

  	
  14.82

  	
  %

  	
  0.49

  	
  %

  	
  1.88

  	
  %

  
	
  12

  	
   

  	
  93,703.28

  	
   

  	
  1,175.99

  	
   

  	
  94,879.27

  	
   

  	
  573,664.47

  	
   

  	
  17.76

  	
  %

  	
  0.59

  	
  %

  	
  2.47

  	
  %

  
	
  13

  	
   

  	
  164,587.66

  	
   

  	
  1,175.99

  	
   

  	
  165,763.65

  	
   

  	
  739,428.13

  	
   

  	
  22.89

  	
  %

  	
  0.76

  	
  %

  	
  3.23

  	
  %

  

 

I-A-4

 

	
  A

  	
   

  	
  B

  	
   

  	
  C

  	
   

  	
  D

  	
   

  	
  E

  	
   

  	
  F

  	
   

  	
  G

  	
   

  	
  H

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Day

  	
   

  	
  Daily Revenue

  Collections

  	
   

  	
  Distribute Billed /

  Uncollected

  	
   

  	
  Total B + C

  	
   

  	
  Accumulative

  	
   

  	
  % of Total

  Amt. Billed

  	
   

  	
  Column F /

  30

  	
   

  	
  Accumulative

  	
   

  
	
  14

  	
   

  	
  325,790.19

  	
   

  	
  1,175.99

  	
   

  	
  326,966.18

  	
   

  	
  1,066,394.31

  	
   

  	
  33.01

  	
  %

  	
  1.10

  	
  %

  	
  4.33

  	
  %

  
	
  15

  	
   

  	
  185,591.37

  	
   

  	
  1,175.99

  	
   

  	
  186,767.36

  	
   

  	
  1,253,161.68

  	
   

  	
  38.79

  	
  %

  	
  1.29

  	
  %

  	
  5.63

  	
  %

  
	
  16

  	
   

  	
  152,693.91

  	
   

  	
  1,175.99

  	
   

  	
  153,869.90

  	
   

  	
  1,407,031.58

  	
   

  	
  43.56

  	
  %

  	
  1.45

  	
  %

  	
  7.08

  	
  %

  
	
  17

  	
   

  	
  86,595.30

  	
   

  	
  1,175.99

  	
   

  	
  87,771.29

  	
   

  	
  1,494,802.88

  	
   

  	
  46.27

  	
  %

  	
  1.54

  	
  %

  	
  8.62

  	
  %

  
	
  18

  	
   

  	
  276,547.00

  	
   

  	
  1,175.99

  	
   

  	
  277,722.99

  	
   

  	
  1,772,525.87

  	
   

  	
  54.87

  	
  %

  	
  1.83

  	
  %

  	
  10.45

  	
  %

  
	
  19

  	
   

  	
  139,463.25

  	
   

  	
  1,175.99

  	
   

  	
  140,639.24

  	
   

  	
  1,913,165.12

  	
   

  	
  59.22

  	
  %

  	
  1.97

  	
  %

  	
  12.42

  	
  %

  
	
  20

  	
   

  	
  156,965.79

  	
   

  	
  1,175.99

  	
   

  	
  158,141.78

  	
   

  	
  2,071,306.90

  	
   

  	
  64.12

  	
  %

  	
  2.14

  	
  %

  	
  14.56

  	
  %

  
	
  21

  	
   

  	
  79,206.83

  	
   

  	
  1,175.99

  	
   

  	
  80,382.82

  	
   

  	
  2,151,689.72

  	
   

  	
  66.61

  	
  %

  	
  2.22

  	
  %

  	
  16.78

  	
  %

  
	
  22

  	
   

  	
  182,971.55

  	
   

  	
  1,175.99

  	
   

  	
  184,147.54

  	
   

  	
  2,335,837.27

  	
   

  	
  72.31

  	
  %

  	
  2.41

  	
  %

  	
  19.19

  	
  %

  
	
  23

  	
   

  	
  45,816.61

  	
   

  	
  1,175.99

  	
   

  	
  46,992.60

  	
   

  	
  2,382,829.87

  	
   

  	
  73.76

  	
  %

  	
  2.46

  	
  %

  	
  21.65

  	
  %

  
	
  24

  	
   

  	
  45,598.76

  	
   

  	
  1,175.99

  	
   

  	
  46,774.75

  	
   

  	
  2,429,604.63

  	
   

  	
  75.21

  	
  %

  	
  2.51

  	
  %

  	
  24.16

  	
  %

  
	
  25

  	
   

  	
  59,050.95

  	
   

  	
  1,175.99

  	
   

  	
  60,226.94

  	
   

  	
  2,489,831.57

  	
   

  	
  77.08

  	
  %

  	
  2.57

  	
  %

  	
  26.73

  	
  %

  
	
  26

  	
   

  	
  89,249.82

  	
   

  	
  1,175.99

  	
   

  	
  90,425.81

  	
   

  	
  2,580,257.39

  	
   

  	
  79.87

  	
  %

  	
  2.66

  	
  %

  	
  29.39

  	
  %

  
	
  27

  	
   

  	
  54,428.39

  	
   

  	
  1,175.99

  	
   

  	
  55,604.38

  	
   

  	
  2,635,861.77

  	
   

  	
  81.60

  	
  %

  	
  2.72

  	
  %

  	
  32.11

  	
  %

  
	
  28

  	
   

  	
  14,689.38

  	
   

  	
  1,175.99

  	
   

  	
  15,865.37

  	
   

  	
  2,651,727.15

  	
   

  	
  82.09

  	
  %

  	
  2.74

  	
  %

  	
  34.85

  	
  %

  
	
  29

  	
   

  	
  34,748.33

  	
   

  	
  1,175.99

  	
   

  	
  35,924.32

  	
   

  	
  2,687,651.47

  	
   

  	
  83.20

  	
  %

  	
  2.77

  	
  %

  	
  37.62

  	
  %

  
	
  30

  	
   

  	
  14,842.03

  	
   

  	
  1,175.99

  	
   

  	
  16,018.02

  	
   

  	
  2,703,669.50

  	
   

  	
  83.70

  	
  %

  	
  2.79

  	
  %

  	
  40.41

  	
  %

  
	
  31

  	
   

  	
  11,919.52

  	
   

  	
  1,175.99

  	
   

  	
  13,095.51

  	
   

  	
  2,716,765.01

  	
   

  	
  84.10

  	
  %

  	
  2.80

  	
  %

  	
  43.18

  	
  %

  
	
  32

  	
   

  	
  11,627.32

  	
   

  	
  1,175.99

  	
   

  	
  12,803.31

  	
   

  	
  2,729,568.32

  	
   

  	
  84.50

  	
  %

  	
  2.82

  	
  %

  	
  45.96

  	
  %

  
	
  33

  	
   

  	
  15,874.02

  	
   

  	
  1,175.99

  	
   

  	
  17,050.01

  	
   

  	
  2,746,618.34

  	
   

  	
  85.02

  	
  %

  	
  2.83

  	
  %

  	
  48.75

  	
  %

  
	
  34

  	
   

  	
  23,274.47

  	
   

  	
  1,175.99

  	
   

  	
  24,450.46

  	
   

  	
  2,771,068.80

  	
   

  	
  85.78

  	
  %

  	
  2.86

  	
  %

  	
  51.56

  	
  %

  
	
  35

  	
   

  	
  24,699.89

  	
   

  	
  1,175.99

  	
   

  	
  25,875.88

  	
   

  	
  2,796,944.69

  	
   

  	
  86.58

  	
  %

  	
  2.89

  	
  %

  	
  54.38

  	
  %

  
	
  36

  	
   

  	
  3,988.02

  	
   

  	
  1,175.99

  	
   

  	
  5,164.01

  	
   

  	
  2,802,108.70

  	
   

  	
  86.74

  	
  %

  	
  2.89

  	
  %

  	
  57.18

  	
  %

  
	
  37

  	
   

  	
  17,278.51

  	
   

  	
  1,175.99

  	
   

  	
  18,454.50

  	
   

  	
  2,820,563.21

  	
   

  	
  87.31

  	
  %

  	
  2.91

  	
  %

  	
  59.93

  	
  %

  
	
  38

  	
   

  	
  2,333.12

  	
   

  	
  1,175.99

  	
   

  	
  3,509.11

  	
   

  	
  2,824,072.32

  	
   

  	
  87.42

  	
  %

  	
  2.91

  	
  %

  	
  62.60

  	
  %

  
	
  39

  	
   

  	
  32,268.03

  	
   

  	
  1,175.99

  	
   

  	
  33,444.02

  	
   

  	
  2,857,516.35

  	
   

  	
  88.46

  	
  %

  	
  2.95

  	
  %

  	
  65.26

  	
  %

  
	
  40

  	
   

  	
  1,944.07

  	
   

  	
  1,175.99

  	
   

  	
  3,120.06

  	
   

  	
  2,860,636.41

  	
   

  	
  88.55

  	
  %

  	
  2.95

  	
  %

  	
  67.84

  	
  %

  
	
  41

  	
   

  	
  5,995.35

  	
   

  	
  1,175.99

  	
   

  	
  7,171.34

  	
   

  	
  2,867,807.76

  	
   

  	
  88.78

  	
  %

  	
  2.96

  	
  %

  	
  70.31

  	
  %

  
	
  42

  	
   

  	
  4,464.93

  	
   

  	
  1,175.99

  	
   

  	
  5,640.92

  	
   

  	
  2,873,448.68

  	
   

  	
  88.95

  	
  %

  	
  2.97

  	
  %

  	
  72.68

  	
  %

  
	
  43

  	
   

  	
  2,759.99

  	
   

  	
  1,175.99

  	
   

  	
  3,935.98

  	
   

  	
  2,877,384.66

  	
   

  	
  89.07

  	
  %

  	
  2.97

  	
  %

  	
  74.88

  	
  %

  
	
  44

  	
   

  	
  14,421.87

  	
   

  	
  1,175.99

  	
   

  	
  15,597.86

  	
   

  	
  2,892,982.53

  	
   

  	
  89.56

  	
  %

  	
  2.99

  	
  %

  	
  76.77

  	
  %

  
	
  45

  	
   

  	
  1,971.12

  	
   

  	
  1,175.99

  	
   

  	
  3,147.11

  	
   

  	
  2,896,129.64

  	
   

  	
  89.65

  	
  %

  	
  2.99

  	
  %

  	
  78.46

  	
  %

  
	
  46

  	
   

  	
  3,617.64

  	
   

  	
  1,175.99

  	
   

  	
  4,793.63

  	
   

  	
  2,900,923.28

  	
   

  	
  89.80

  	
  %

  	
  2.99

  	
  %

  	
  80.01

  	
  %

  
	
  47

  	
   

  	
  2,009.77

  	
   

  	
  1,175.99

  	
   

  	
  3,185.76

  	
   

  	
  2,904,109.04

  	
   

  	
  89.90

  	
  %

  	
  3.00

  	
  %

  	
  81.46

  	
  %

  
	
  48

  	
   

  	
  7,641.62

  	
   

  	
  1,175.99

  	
   

  	
  8,817.61

  	
   

  	
  2,912,926.66

  	
   

  	
  90.17

  	
  %

  	
  3.01

  	
  %

  	
  82.64

  	
  %

  
	
  49

  	
   

  	
  5,180.15

  	
   

  	
  1,175.99

  	
   

  	
  6,356.14

  	
   

  	
  2,919,282.80

  	
   

  	
  90.37

  	
  %

  	
  3.01

  	
  %

  	
  83.68

  	
  %

  
	
  50

  	
   

  	
  999.65

  	
   

  	
  1,175.99

  	
   

  	
  2,175.64

  	
   

  	
  2,921,458.45

  	
   

  	
  90.44

  	
  %

  	
  3.01

  	
  %

  	
  84.55

  	
  %

  
	
  51

  	
   

  	
  1,163.71

  	
   

  	
  1,175.99

  	
   

  	
  2,339.70

  	
   

  	
  2,923,798.15

  	
   

  	
  90.51

  	
  %

  	
  3.02

  	
  %

  	
  85.35

  	
  %

  
	
  52

  	
   

  	
  3,208.83

  	
   

  	
  1,175.99

  	
   

  	
  4,384.82

  	
   

  	
  2,928,182.98

  	
   

  	
  90.65

  	
  %

  	
  3.02

  	
  %

  	
  85.96

  	
  %

  
	
  53

  	
   

  	
  3,238.78

  	
   

  	
  1,175.99

  	
   

  	
  4,414.77

  	
   

  	
  2,932,597.75

  	
   

  	
  90.78

  	
  %

  	
  3.03

  	
  %

  	
  86.53

  	
  %

  
	
  54

  	
   

  	
  1,707.55

  	
   

  	
  1,175.99

  	
   

  	
  2,883.54

  	
   

  	
  2,935,481.29

  	
   

  	
  90.87

  	
  %

  	
  3.03

  	
  %

  	
  87.05

  	
  %

  
	
  55

  	
   

  	
  1,415.58

  	
   

  	
  1,175.99

  	
   

  	
  2,591.57

  	
   

  	
  2,938,072.87

  	
   

  	
  90.95

  	
  %

  	
  3.03

  	
  %

  	
  87.51

  	
  %

  
	
  56

  	
   

  	
  1,325.49

  	
   

  	
  1,175.99

  	
   

  	
  2,501.48

  	
   

  	
  2,940,574.35

  	
   

  	
  91.03

  	
  %

  	
  3.03

  	
  %

  	
  87.88

  	
  %

  
	
  57

  	
   

  	
  1,085.50

  	
   

  	
  1,175.99

  	
   

  	
  2,261.49

  	
   

  	
  2,942,835.85

  	
   

  	
  91.10

  	
  %

  	
  3.04

  	
  %

  	
  88.20

  	
  %

  
	
  58

  	
   

  	
  1,200.15

  	
   

  	
  1,175.99

  	
   

  	
  2,376.14

  	
   

  	
  2,945,211.99

  	
   

  	
  91.17

  	
  %

  	
  3.04

  	
  %

  	
  88.50

  	
  %

  
	
  59

  	
   

  	
  733.59

  	
   

  	
  1,175.99

  	
   

  	
  1,909.58

  	
   

  	
  2,947,121.58

  	
   

  	
  91.23

  	
  %

  	
  3.04

  	
  %

  	
  88.77

  	
  %

  
	
  60

  	
   

  	
  2,471.63

  	
   

  	
  1,175.99

  	
   

  	
  3,647.62

  	
   

  	
  2,950,769.20

  	
   

  	
  91.34

  	
  %

  	
  3.04

  	
  %

  	
  89.03

  	
  %

  

 

I-A-5

 

	
  A

  	
   

  	
  B

  	
   

  	
  C

  	
   

  	
  D

  	
   

  	
  E

  	
   

  	
  F

  	
   

  	
  G

  	
   

  	
  H

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Day

  	
   

  	
  Daily Revenue

  Collections

  	
   

  	
  Distribute Billed /

  Uncollected

  	
   

  	
  Total B + C

  	
   

  	
  Accumulative

  	
   

  	
  % of Total

  Amt. Billed

  	
   

  	
  Column F /

  30

  	
   

  	
  Accumulative

  	
   

  
	
  61

  	
   

  	
  6,048.95

  	
   

  	
  1,175.99

  	
   

  	
  7,224.94

  	
   

  	
  2,957,994.15

  	
   

  	
  91.57

  	
  %

  	
  3.05

  	
  %

  	
  89.28

  	
  %

  
	
  62

  	
   

  	
  2,054.42

  	
   

  	
  1,175.99

  	
   

  	
  3,230.41

  	
   

  	
  2,961,224.56

  	
   

  	
  91.67

  	
  %

  	
  3.06

  	
  %

  	
  89.51

  	
  %

  
	
  63

  	
   

  	
  1,757.12

  	
   

  	
  1,175.99

  	
   

  	
  2,933.11

  	
   

  	
  2,964,157.67

  	
   

  	
  91.76

  	
  %

  	
  3.06

  	
  %

  	
  89.74

  	
  %

  
	
  64

  	
   

  	
  1,708.53

  	
   

  	
  1,175.99

  	
   

  	
  2,884.52

  	
   

  	
  2,967,042.20

  	
   

  	
  91.85

  	
  %

  	
  3.06

  	
  %

  	
  89.94

  	
  %

  
	
  65

  	
   

  	
  759.02

  	
   

  	
  1,175.99

  	
   

  	
  1,935.01

  	
   

  	
  2,968,977.21

  	
   

  	
  91.91

  	
  %

  	
  3.06

  	
  %

  	
  90.12

  	
  %

  
	
  66

  	
   

  	
  1,492.11

  	
   

  	
  1,175.99

  	
   

  	
  2,668.10

  	
   

  	
  2,971,645.32

  	
   

  	
  91.99

  	
  %

  	
  3.07

  	
  %

  	
  90.29

  	
  %

  
	
  67

  	
   

  	
  482.85

  	
   

  	
  1,175.99

  	
   

  	
  1,658.84

  	
   

  	
  2,973,304.16

  	
   

  	
  92.04

  	
  %

  	
  3.07

  	
  %

  	
  90.45

  	
  %

  
	
  68

  	
   

  	
  380.51

  	
   

  	
  1,175.99

  	
   

  	
  1,556.50

  	
   

  	
  2,974,860.67

  	
   

  	
  92.09

  	
  %

  	
  3.07

  	
  %

  	
  90.61

  	
  %

  
	
  69

  	
   

  	
  363.72

  	
   

  	
  1,175.99

  	
   

  	
  1,539.71

  	
   

  	
  2,976,400.38

  	
   

  	
  92.14

  	
  %

  	
  3.07

  	
  %

  	
  90.73

  	
  %

  
	
  70

  	
   

  	
  1,158.96

  	
   

  	
  1,175.99

  	
   

  	
  2,334.95

  	
   

  	
  2,978,735.34

  	
   

  	
  92.21

  	
  %

  	
  3.07

  	
  %

  	
  90.85

  	
  %

  
	
  71

  	
   

  	
  1,054.78

  	
   

  	
  1,175.99

  	
   

  	
  2,230.77

  	
   

  	
  2,980,966.11

  	
   

  	
  92.28

  	
  %

  	
  3.08

  	
  %

  	
  90.97

  	
  %

  
	
  72

  	
   

  	
  239.89

  	
   

  	
  1,175.99

  	
   

  	
  1,415.88

  	
   

  	
  2,982,382.00

  	
   

  	
  92.32

  	
  %

  	
  3.08

  	
  %

  	
  91.08

  	
  %

  
	
  73

  	
   

  	
  259.86

  	
   

  	
  1,175.99

  	
   

  	
  1,435.85

  	
   

  	
  2,983,817.85

  	
   

  	
  92.37

  	
  %

  	
  3.08

  	
  %

  	
  91.19

  	
  %

  
	
  74

  	
   

  	
  328.42

  	
   

  	
  1,175.99

  	
   

  	
  1,504.41

  	
   

  	
  2,985,322.26

  	
   

  	
  92.41

  	
  %

  	
  3.08

  	
  %

  	
  91.29

  	
  %

  
	
  75

  	
   

  	
  297.08

  	
   

  	
  1,175.99

  	
   

  	
  1,473.07

  	
   

  	
  2,986,795.34

  	
   

  	
  92.46

  	
  %

  	
  3.08

  	
  %

  	
  91.38

  	
  %

  
	
  76

  	
   

  	
  1,504.64

  	
   

  	
  1,175.99

  	
   

  	
  2,680.63

  	
   

  	
  2,989,475.97

  	
   

  	
  92.54

  	
  %

  	
  3.08

  	
  %

  	
  91.47

  	
  %

  
	
  77

  	
   

  	
  485.71

  	
   

  	
  1,175.99

  	
   

  	
  1,661.70

  	
   

  	
  2,991,137.68

  	
   

  	
  92.59

  	
  %

  	
  3.09

  	
  %

  	
  91.56

  	
  %

  
	
  78

  	
   

  	
  441.96

  	
   

  	
  1,175.99

  	
   

  	
  1,617.95

  	
   

  	
  2,992,755.63

  	
   

  	
  92.64

  	
  %

  	
  3.09

  	
  %

  	
  91.64

  	
  %

  
	
  79

  	
   

  	
  167.62

  	
   

  	
  1,175.99

  	
   

  	
  1,343.61

  	
   

  	
  2,994,099.25

  	
   

  	
  92.69

  	
  %

  	
  3.09

  	
  %

  	
  91.72

  	
  %

  
	
  80

  	
   

  	
  249.61

  	
   

  	
  1,175.99

  	
   

  	
  1,425.60

  	
   

  	
  2,995,524.85

  	
   

  	
  92.73

  	
  %

  	
  3.09

  	
  %

  	
  91.80

  	
  %

  
	
  81

  	
   

  	
  150.44

  	
   

  	
  1,175.99

  	
   

  	
  1,326.43

  	
   

  	
  2,996,851.29

  	
   

  	
  92.77

  	
  %

  	
  3.09

  	
  %

  	
  91.87

  	
  %

  
	
  82

  	
   

  	
  159.99

  	
   

  	
  1,175.99

  	
   

  	
  1,335.98

  	
   

  	
  2,998,187.27

  	
   

  	
  92.81

  	
  %

  	
  3.09

  	
  %

  	
  91.94

  	
  %

  
	
  83

  	
   

  	
  253.65

  	
   

  	
  1,175.99

  	
   

  	
  1,429.64

  	
   

  	
  2,999,616.92

  	
   

  	
  92.86

  	
  %

  	
  3.10

  	
  %

  	
  92.01

  	
  %

  
	
  84

  	
   

  	
  275.86

  	
   

  	
  1,175.99

  	
   

  	
  1,451.85

  	
   

  	
  3,001,068.77

  	
   

  	
  92.90

  	
  %

  	
  3.10

  	
  %

  	
  92.08

  	
  %

  
	
  85

  	
   

  	
  163.58

  	
   

  	
  1,175.99

  	
   

  	
  1,339.57

  	
   

  	
  3,002,408.34

  	
   

  	
  92.94

  	
  %

  	
  3.10

  	
  %

  	
  92.15

  	
  %

  
	
  86

  	
   

  	
  11,003.07

  	
   

  	
  1,175.99

  	
   

  	
  12,179.06

  	
   

  	
  3,014,587.41

  	
   

  	
  93.32

  	
  %

  	
  3.11

  	
  %

  	
  92.22

  	
  %

  
	
  87

  	
   

  	
  174.91

  	
   

  	
  1,175.99

  	
   

  	
  1,350.90

  	
   

  	
  3,015,938.31

  	
   

  	
  93.36

  	
  %

  	
  3.11

  	
  %

  	
  92.30

  	
  %

  
	
  88

  	
   

  	
  139.60

  	
   

  	
  1,175.99

  	
   

  	
  1,315.59

  	
   

  	
  3,017,253.91

  	
   

  	
  93.40

  	
  %

  	
  3.11

  	
  %

  	
  92.37

  	
  %

  
	
  89

  	
   

  	
  233.61

  	
   

  	
  1,175.99

  	
   

  	
  1,409.60

  	
   

  	
  3,018,663.51

  	
   

  	
  93.45

  	
  %

  	
  3.11

  	
  %

  	
  92.45

  	
  %

  
	
  90

  	
   

  	
  209.04

  	
   

  	
  1,175.99

  	
   

  	
  1,385.03

  	
   

  	
  3,020,048.55

  	
   

  	
  93.49

  	
  %

  	
  3.12

  	
  %

  	
  92.52

  	
  %

  
	
  91

  	
   

  	
  471.54

  	
   

  	
  1,175.99

  	
   

  	
  1,647.53

  	
   

  	
  3,021,696.08

  	
   

  	
  93.54

  	
  %

  	
  3.12

  	
  %

  	
  92.58

  	
  %

  
	
  92

  	
   

  	
  35,020.25

  	
   

  	
  1,175.99

  	
   

  	
  36,196.24

  	
   

  	
  3,057,892.33

  	
   

  	
  94.66

  	
  %

  	
  3.16

  	
  %

  	
  92.68

  	
  %

  
	
  93

  	
   

  	
  237.98

  	
   

  	
  1,175.99

  	
   

  	
  1,413.97

  	
   

  	
  3,059,306.30

  	
   

  	
  94.70

  	
  %

  	
  3.16

  	
  %

  	
  92.78

  	
  %

  
	
  94

  	
   

  	
  377.18

  	
   

  	
  1,175.99

  	
   

  	
  1,553.17

  	
   

  	
  3,060,859.48

  	
   

  	
  94.75

  	
  %

  	
  3.16

  	
  %

  	
  92.88

  	
  %

  
	
  95

  	
   

  	
  83.78

  	
   

  	
  1,175.99

  	
   

  	
  1,259.77

  	
   

  	
  3,062,119.25

  	
   

  	
  94.79

  	
  %

  	
  3.16

  	
  %

  	
  92.98

  	
  %

  
	
  96

  	
   

  	
  127.43

  	
   

  	
  1,175.99

  	
   

  	
  1,303.42

  	
   

  	
  3,063,422.67

  	
   

  	
  94.83

  	
  %

  	
  3.16

  	
  %

  	
  93.07

  	
  %

  
	
  97

  	
   

  	
  186.50

  	
   

  	
  1,175.99

  	
   

  	
  1,362.49

  	
   

  	
  3,064,785.17

  	
   

  	
  94.87

  	
  %

  	
  3.16

  	
  %

  	
  93.16

  	
  %

  
	
  98

  	
   

  	
  74.09

  	
   

  	
  1,175.99

  	
   

  	
  1,250.08

  	
   

  	
  3,066,035.25

  	
   

  	
  94.91

  	
  %

  	
  3.16

  	
  %

  	
  93.26

  	
  %

  
	
  99

  	
   

  	
  179.36

  	
   

  	
  1,175.99

  	
   

  	
  1,355.35

  	
   

  	
  3,067,390.61

  	
   

  	
  94.95

  	
  %

  	
  3.17

  	
  %

  	
  93.35

  	
  %

  
	
  100

  	
   

  	
  126.86

  	
   

  	
  1,175.99

  	
   

  	
  1,302.85

  	
   

  	
  3,068,693.46

  	
   

  	
  94.99

  	
  %

  	
  3.17

  	
  %

  	
  93.45

  	
  %

  
	
  101

  	
   

  	
  220.27

  	
   

  	
  1,175.99

  	
   

  	
  1,396.26

  	
   

  	
  3,070,089.73

  	
   

  	
  95.04

  	
  %

  	
  3.17

  	
  %

  	
  93.54

  	
  %

  
	
  102

  	
   

  	
  73.70

  	
   

  	
  1,175.99

  	
   

  	
  1,249.69

  	
   

  	
  3,071,339.42

  	
   

  	
  95.08

  	
  %

  	
  3.17

  	
  %

  	
  93.63

  	
  %

  
	
  103

  	
   

  	
  77.43

  	
   

  	
  1,175.99

  	
   

  	
  1,253.42

  	
   

  	
  3,072,592.85

  	
   

  	
  95.12

  	
  %

  	
  3.17

  	
  %

  	
  93.72

  	
  %

  
	
  104

  	
   

  	
  115.81

  	
   

  	
  1,175.99

  	
   

  	
  1,291.80

  	
   

  	
  3,073,884.65

  	
   

  	
  95.16

  	
  %

  	
  3.17

  	
  %

  	
  93.81

  	
  %

  
	
  105

  	
   

  	
  150.25

  	
   

  	
  1,175.99

  	
   

  	
  1,326.24

  	
   

  	
  3,075,210.89

  	
   

  	
  95.20

  	
  %

  	
  3.17

  	
  %

  	
  93.90

  	
  %

  
	
  106

  	
   

  	
  78.14

  	
   

  	
  1,175.99

  	
   

  	
  1,254.13

  	
   

  	
  3,076,465.03

  	
   

  	
  95.24

  	
  %

  	
  3.17

  	
  %

  	
  93.99

  	
  %

  
	
  107

  	
   

  	
  81.79

  	
   

  	
  1,175.99

  	
   

  	
  1,257.78

  	
   

  	
  3,077,722.81

  	
   

  	
  95.27

  	
  %

  	
  3.18

  	
  %

  	
  94.08

  	
  %

  

 

I-A-6

 

	
  A

  	
   

  	
  B

  	
   

  	
  C

  	
   

  	
  D

  	
   

  	
  E

  	
   

  	
  F

  	
   

  	
  G

  	
   

  	
  H

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Day

  	
   

  	
  Daily Revenue

  Collections

  	
   

  	
  Distribute Billed /

  Uncollected

  	
   

  	
  Total B + C

  	
   

  	
  Accumulative

  	
   

  	
  % of Total

  Amt. Billed

  	
   

  	
  Column F /

  30

  	
   

  	
  Accumulative

  	
   

  
	
  108

  	
   

  	
  94.45

  	
   

  	
  1,175.99

  	
   

  	
  1,270.44

  	
   

  	
  3,078,993.26

  	
   

  	
  95.31

  	
  %

  	
  3.18

  	
  %

  	
  94.17

  	
  %

  
	
  109

  	
   

  	
  111.90

  	
   

  	
  1,175.99

  	
   

  	
  1,287.89

  	
   

  	
  3,080,281.15

  	
   

  	
  95.35

  	
  %

  	
  3.18

  	
  %

  	
  94.26

  	
  %

  
	
  110

  	
   

  	
  71.80

  	
   

  	
  1,175.99

  	
   

  	
  1,247.79

  	
   

  	
  3,081,528.95

  	
   

  	
  95.39

  	
  %

  	
  3.18

  	
  %

  	
  94.35

  	
  %

  
	
  111

  	
   

  	
  22,668.11

  	
   

  	
  1,175.99

  	
   

  	
  23,844.10

  	
   

  	
  3,105,373.05

  	
   

  	
  96.13

  	
  %

  	
  3.20

  	
  %

  	
  94.46

  	
  %

  
	
  112

  	
   

  	
  136.14

  	
   

  	
  1,175.99

  	
   

  	
  1,312.13

  	
   

  	
  3,106,685.19

  	
   

  	
  96.17

  	
  %

  	
  3.21

  	
  %

  	
  94.57

  	
  %

  
	
  113

  	
   

  	
  279.52

  	
   

  	
  1,175.99

  	
   

  	
  1,455.51

  	
   

  	
  3,108,140.70

  	
   

  	
  96.22

  	
  %

  	
  3.21

  	
  %

  	
  94.68

  	
  %

  
	
  114

  	
   

  	
  60.29

  	
   

  	
  1,175.99

  	
   

  	
  1,236.28

  	
   

  	
  3,109,376.99

  	
   

  	
  96.25

  	
  %

  	
  3.21

  	
  %

  	
  94.80

  	
  %

  
	
  115

  	
   

  	
  51.40

  	
   

  	
  1,175.99

  	
   

  	
  1,227.39

  	
   

  	
  3,110,604.38

  	
   

  	
  96.29

  	
  %

  	
  3.21

  	
  %

  	
  94.91

  	
  %

  
	
  116

  	
   

  	
  114.82

  	
   

  	
  1,175.99

  	
   

  	
  1,290.81

  	
   

  	
  3,111,895.19

  	
   

  	
  96.33

  	
  %

  	
  3.21

  	
  %

  	
  95.01

  	
  %

  
	
  117

  	
   

  	
  122.36

  	
   

  	
  1,175.99

  	
   

  	
  1,298.35

  	
   

  	
  3,113,193.55

  	
   

  	
  96.37

  	
  %

  	
  3.21

  	
  %

  	
  95.11

  	
  %

  
	
  118

  	
   

  	
  43.73

  	
   

  	
  1,175.99

  	
   

  	
  1,219.72

  	
   

  	
  3,114,413.27

  	
   

  	
  96.41

  	
  %

  	
  3.21

  	
  %

  	
  95.21

  	
  %

  
	
  119

  	
   

  	
  39.80

  	
   

  	
  1,175.99

  	
   

  	
  1,215.79

  	
   

  	
  3,115,629.07

  	
   

  	
  96.45

  	
  %

  	
  3.21

  	
  %

  	
  95.31

  	
  %

  
	
  120

  	
   

  	
  22.98

  	
   

  	
  1,175.99

  	
   

  	
  1,198.97

  	
   

  	
  3,116,828.04

  	
   

  	
  96.48

  	
  %

  	
  3.22

  	
  %

  	
  95.41

  	
  %

  
	
  121

  	
   

  	
  64.62

  	
   

  	
  1,175.99

  	
   

  	
  1,240.61

  	
   

  	
  3,118,068.66

  	
   

  	
  96.52

  	
  %

  	
  3.22

  	
  %

  	
  95.51

  	
  %

  
	
  122

  	
   

  	
  88.46

  	
   

  	
  1,175.99

  	
   

  	
  1,264.45

  	
   

  	
  3,119,333.11

  	
   

  	
  96.56

  	
  %

  	
  3.22

  	
  %

  	
  95.57

  	
  %

  
	
  123

  	
   

  	
  134.78

  	
   

  	
  1,175.99

  	
   

  	
  1,310.77

  	
   

  	
  3,120,643.89

  	
   

  	
  96.60

  	
  %

  	
  3.22

  	
  %

  	
  95.64

  	
  %

  
	
  124

  	
   

  	
  98.43

  	
   

  	
  1,175.99

  	
   

  	
  1,274.42

  	
   

  	
  3,121,918.31

  	
   

  	
  96.64

  	
  %

  	
  3.22

  	
  %

  	
  95.70

  	
  %

  
	
  125

  	
   

  	
  2,848.31

  	
   

  	
  1,175.99

  	
   

  	
  4,024.30

  	
   

  	
  3,125,942.62

  	
   

  	
  96.77

  	
  %

  	
  3.23

  	
  %

  	
  95.76

  	
  %

  
	
  126

  	
   

  	
  44.32

  	
   

  	
  1,175.99

  	
   

  	
  1,220.31

  	
   

  	
  3,127,162.93

  	
   

  	
  96.80

  	
  %

  	
  3.23

  	
  %

  	
  95.83

  	
  %

  
	
  127

  	
   

  	
  47.04

  	
   

  	
  1,175.99

  	
   

  	
  1,223.03

  	
   

  	
  3,128,385.96

  	
   

  	
  96.84

  	
  %

  	
  3.23

  	
  %

  	
  95.90

  	
  %

  
	
  128

  	
   

  	
  16.78

  	
   

  	
  1,175.99

  	
   

  	
  1,192.77

  	
   

  	
  3,129,578.74

  	
   

  	
  96.88

  	
  %

  	
  3.23

  	
  %

  	
  95.96

  	
  %

  
	
  129

  	
   

  	
  210.85

  	
   

  	
  1,175.99

  	
   

  	
  1,386.84

  	
   

  	
  3,130,965.58

  	
   

  	
  96.92

  	
  %

  	
  3.23

  	
  %

  	
  96.03

  	
  %

  
	
  130

  	
   

  	
  30.67

  	
   

  	
  1,175.99

  	
   

  	
  1,206.66

  	
   

  	
  3,132,172.25

  	
   

  	
  96.96

  	
  %

  	
  3.23

  	
  %

  	
  96.09

  	
  %

  
	
  131

  	
   

  	
  251.32

  	
   

  	
  1,175.99

  	
   

  	
  1,427.31

  	
   

  	
  3,133,599.56

  	
   

  	
  97.00

  	
  %

  	
  3.23

  	
  %

  	
  96.16

  	
  %

  
	
  132

  	
   

  	
  70.60

  	
   

  	
  1,175.99

  	
   

  	
  1,246.59

  	
   

  	
  3,134,846.16

  	
   

  	
  97.04

  	
  %

  	
  3.23

  	
  %

  	
  96.22

  	
  %

  
	
  133

  	
   

  	
  50.77

  	
   

  	
  1,175.99

  	
   

  	
  1,226.76

  	
   

  	
  3,136,072.92

  	
   

  	
  97.08

  	
  %

  	
  3.24

  	
  %

  	
  96.29

  	
  %

  
	
  134

  	
   

  	
  69.57

  	
   

  	
  1,175.99

  	
   

  	
  1,245.56

  	
   

  	
  3,137,318.49

  	
   

  	
  97.12

  	
  %

  	
  3.24

  	
  %

  	
  96.35

  	
  %

  
	
  135

  	
   

  	
  60.51

  	
   

  	
  1,175.99

  	
   

  	
  1,236.50

  	
   

  	
  3,138,554.99

  	
   

  	
  97.16

  	
  %

  	
  3.24

  	
  %

  	
  96.42

  	
  %

  
	
  136

  	
   

  	
  44.74

  	
   

  	
  1,175.99

  	
   

  	
  1,220.73

  	
   

  	
  3,139,775.72

  	
   

  	
  97.20

  	
  %

  	
  3.24

  	
  %

  	
  96.48

  	
  %

  
	
  137

  	
   

  	
  35.11

  	
   

  	
  1,175.99

  	
   

  	
  1,211.10

  	
   

  	
  3,140,986.83

  	
   

  	
  97.23

  	
  %

  	
  3.24

  	
  %

  	
  96.55

  	
  %

  
	
  138

  	
   

  	
  12.28

  	
   

  	
  1,175.99

  	
   

  	
  1,188.27

  	
   

  	
  3,142,175.10

  	
   

  	
  97.27

  	
  %

  	
  3.24

  	
  %

  	
  96.62

  	
  %

  
	
  139

  	
   

  	
  15,088.32

  	
   

  	
  1,175.99

  	
   

  	
  16,264.31

  	
   

  	
  3,158,439.42

  	
   

  	
  97.77

  	
  %

  	
  3.26

  	
  %

  	
  96.70

  	
  %

  
	
  140

  	
   

  	
  84.30

  	
   

  	
  1,175.99

  	
   

  	
  1,260.29

  	
   

  	
  3,159,699.71

  	
   

  	
  97.81

  	
  %

  	
  3.26

  	
  %

  	
  96.78

  	
  %

  
	
  141

  	
   

  	
  525.56

  	
   

  	
  1,175.99

  	
   

  	
  1,701.55

  	
   

  	
  3,161,401.27

  	
   

  	
  97.86

  	
  %

  	
  3.26

  	
  %

  	
  96.83

  	
  %

  
	
  142

  	
   

  	
  45.20

  	
   

  	
  1,175.99

  	
   

  	
  1,221.19

  	
   

  	
  3,162,622.46

  	
   

  	
  97.90

  	
  %

  	
  3.26

  	
  %

  	
  96.89

  	
  %

  
	
  143

  	
   

  	
  47.22

  	
   

  	
  1,175.99

  	
   

  	
  1,223.21

  	
   

  	
  3,163,845.68

  	
   

  	
  97.94

  	
  %

  	
  3.26

  	
  %

  	
  96.95

  	
  %

  
	
  144

  	
   

  	
  48.90

  	
   

  	
  1,175.99

  	
   

  	
  1,224.89

  	
   

  	
  3,165,070.57

  	
   

  	
  97.98

  	
  %

  	
  3.27

  	
  %

  	
  97.01

  	
  %

  
	
  145

  	
   

  	
  22.21

  	
   

  	
  1,175.99

  	
   

  	
  1,198.20

  	
   

  	
  3,166,268.78

  	
   

  	
  98.02

  	
  %

  	
  3.27

  	
  %

  	
  97.06

  	
  %

  
	
  146

  	
   

  	
  13.75

  	
   

  	
  1,175.99

  	
   

  	
  1,189.74

  	
   

  	
  3,167,458.52

  	
   

  	
  98.05

  	
  %

  	
  3.27

  	
  %

  	
  97.12

  	
  %

  
	
  147

  	
   

  	
  137.01

  	
   

  	
  1,175.99

  	
   

  	
  1,313.00

  	
   

  	
  3,168,771.52

  	
   

  	
  98.09

  	
  %

  	
  3.27

  	
  %

  	
  97.18

  	
  %

  
	
  148

  	
   

  	
  6.24

  	
   

  	
  1,175.99

  	
   

  	
  1,182.23

  	
   

  	
  3,169,953.76

  	
   

  	
  98.13

  	
  %

  	
  3.27

  	
  %

  	
  97.24

  	
  %

  
	
  149

  	
   

  	
  34.66

  	
   

  	
  1,175.99

  	
   

  	
  1,210.65

  	
   

  	
  3,171,164.41

  	
   

  	
  98.17

  	
  %

  	
  3.27

  	
  %

  	
  97.29

  	
  %

  
	
  150

  	
   

  	
  99.24

  	
   

  	
  1,175.99

  	
   

  	
  1,275.23

  	
   

  	
  3,172,439.65

  	
   

  	
  98.21

  	
  %

  	
  3.27

  	
  %

  	
  97.35

  	
  %

  
	
  151

  	
   

  	
  41.31

  	
   

  	
  1,175.99

  	
   

  	
  1,217.30

  	
   

  	
  3,173,656.95

  	
   

  	
  98.24

  	
  %

  	
  3.27

  	
  %

  	
  97.41

  	
  %

  
	
  152

  	
   

  	
  94.47

  	
   

  	
  1,175.99

  	
   

  	
  1,270.46

  	
   

  	
  3,174,927.42

  	
   

  	
  98.28

  	
  %

  	
  3.28

  	
  %

  	
  97.47

  	
  %

  
	
  153

  	
   

  	
  16.04

  	
   

  	
  1,175.99

  	
   

  	
  1,192.03

  	
   

  	
  3,176,119.45

  	
   

  	
  98.32

  	
  %

  	
  3.28

  	
  %

  	
  97.52

  	
  %

  
	
  154

  	
   

  	
  13.43

  	
   

  	
  1,175.99

  	
   

  	
  1,189.42

  	
   

  	
  3,177,308.88

  	
   

  	
  98.36

  	
  %

  	
  3.28

  	
  %

  	
  97.58

  	
  %

  

 

I-A-7

 

	
  A

  	
   

  	
  B

  	
   

  	
  C

  	
   

  	
  D

  	
   

  	
  E

  	
   

  	
  F

  	
   

  	
  G

  	
   

  	
  H

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Day

  	
   

  	
  Daily Revenue

  Collections

  	
   

  	
  Distribute Billed /

  Uncollected

  	
   

  	
  Total B + C

  	
   

  	
  Accumulative

  	
   

  	
  % of Total

  Amt. Billed

  	
   

  	
  Column F /

  30

  	
   

  	
  Accumulative

  	
   

  
	
  155

  	
   

  	
  84.47

  	
   

  	
  1,175.99

  	
   

  	
  1,260.46

  	
   

  	
  3,178,569.34

  	
   

  	
  98.40

  	
  %

  	
  3.28

  	
  %

  	
  97.63

  	
  %

  
	
  156

  	
   

  	
  30.85

  	
   

  	
  1,175.99

  	
   

  	
  1,206.84

  	
   

  	
  3,179,776.19

  	
   

  	
  98.43

  	
  %

  	
  3.28

  	
  %

  	
  97.69

  	
  %

  
	
  157

  	
   

  	
  62.92

  	
   

  	
  1,175.99

  	
   

  	
  1,238.91

  	
   

  	
  3,181,015.10

  	
   

  	
  98.47

  	
  %

  	
  3.28

  	
  %

  	
  97.74

  	
  %

  
	
  158

  	
   

  	
  20.13

  	
   

  	
  1,175.99

  	
   

  	
  1,196.12

  	
   

  	
  3,182,211.22

  	
   

  	
  98.51

  	
  %

  	
  3.28

  	
  %

  	
  97.80

  	
  %

  
	
  159

  	
   

  	
  13.67

  	
   

  	
  1,175.99

  	
   

  	
  1,189.66

  	
   

  	
  3,183,400.89

  	
   

  	
  98.55

  	
  %

  	
  3.28

  	
  %

  	
  97.85

  	
  %

  
	
  160

  	
   

  	
  57.96

  	
   

  	
  1,175.99

  	
   

  	
  1,233.95

  	
   

  	
  3,184,634.84

  	
   

  	
  98.58

  	
  %

  	
  3.29

  	
  %

  	
  97.91

  	
  %

  
	
  161

  	
   

  	
  15,184.78

  	
   

  	
  1,175.99

  	
   

  	
  16,360.77

  	
   

  	
  3,200,995.62

  	
   

  	
  99.09

  	
  %

  	
  3.30

  	
  %

  	
  97.98

  	
  %

  
	
  162

  	
   

  	
  74.31

  	
   

  	
  1,175.99

  	
   

  	
  1,250.30

  	
   

  	
  3,202,245.92

  	
   

  	
  99.13

  	
  %

  	
  3.30

  	
  %

  	
  98.05

  	
  %

  
	
  163

  	
   

  	
  22.20

  	
   

  	
  1,175.99

  	
   

  	
  1,198.19

  	
   

  	
  3,203,444.12

  	
   

  	
  99.17

  	
  %

  	
  3.31

  	
  %

  	
  98.11

  	
  %

  
	
  164

  	
   

  	
  56.30

  	
   

  	
  1,175.99

  	
   

  	
  1,232.29

  	
   

  	
  3,204,676.41

  	
   

  	
  99.20

  	
  %

  	
  3.31

  	
  %

  	
  98.18

  	
  %

  
	
  165

  	
   

  	
  33.84

  	
   

  	
  1,175.99

  	
   

  	
  1,209.83

  	
   

  	
  3,205,886.25

  	
   

  	
  99.24

  	
  %

  	
  3.31

  	
  %

  	
  98.25

  	
  %

  
	
  166

  	
   

  	
  10.75

  	
   

  	
  1,175.99

  	
   

  	
  1,186.74

  	
   

  	
  3,207,072.99

  	
   

  	
  99.28

  	
  %

  	
  3.31

  	
  %

  	
  98.32

  	
  %

  
	
  167

  	
   

  	
  20.54

  	
   

  	
  1,175.99

  	
   

  	
  1,196.53

  	
   

  	
  3,208,269.53

  	
   

  	
  99.32

  	
  %

  	
  3.31

  	
  %

  	
  98.39

  	
  %

  
	
  168

  	
   

  	
  28.72

  	
   

  	
  1,175.99

  	
   

  	
  1,204.71

  	
   

  	
  3,209,474.24

  	
   

  	
  99.35

  	
  %

  	
  3.31

  	
  %

  	
  98.46

  	
  %

  
	
  169

  	
   

  	
  33.83

  	
   

  	
  1,175.99

  	
   

  	
  1,209.82

  	
   

  	
  3,210,684.06

  	
   

  	
  99.39

  	
  %

  	
  3.31

  	
  %

  	
  98.52

  	
  %

  
	
  170

  	
   

  	
  18.82

  	
   

  	
  1,175.99

  	
   

  	
  1,194.81

  	
   

  	
  3,211,878.88

  	
   

  	
  99.43

  	
  %

  	
  3.31

  	
  %

  	
  98.57

  	
  %

  
	
  171

  	
   

  	
  9.87

  	
   

  	
  1,175.99

  	
   

  	
  1,185.86

  	
   

  	
  3,213,064.74

  	
   

  	
  99.46

  	
  %

  	
  3.32

  	
  %

  	
  98.62

  	
  %

  
	
  172

  	
   

  	
  50.03

  	
   

  	
  1,175.99

  	
   

  	
  1,226.02

  	
   

  	
  3,214,290.77

  	
   

  	
  99.50

  	
  %

  	
  3.32

  	
  %

  	
  98.68

  	
  %

  
	
  173

  	
   

  	
  22.78

  	
   

  	
  1,175.99

  	
   

  	
  1,198.77

  	
   

  	
  3,215,489.54

  	
   

  	
  99.54

  	
  %

  	
  3.32

  	
  %

  	
  98.73

  	
  %

  
	
  174

  	
   

  	
  29.91

  	
   

  	
  1,175.99

  	
   

  	
  1,205.90

  	
   

  	
  3,216,695.45

  	
   

  	
  99.58

  	
  %

  	
  3.32

  	
  %

  	
  98.78

  	
  %

  
	
  175

  	
   

  	
  32.04

  	
   

  	
  1,175.99

  	
   

  	
  1,208.03

  	
   

  	
  3,217,903.48

  	
   

  	
  99.61

  	
  %

  	
  3.32

  	
  %

  	
  98.84

  	
  %

  
	
  176

  	
   

  	
  11.05

  	
   

  	
  1,175.99

  	
   

  	
  1,187.04

  	
   

  	
  3,219,090.53

  	
   

  	
  99.65

  	
  %

  	
  3.32

  	
  %

  	
  98.89

  	
  %

  
	
  177

  	
   

  	
  22.20

  	
   

  	
  1,175.99

  	
   

  	
  1,198.19

  	
   

  	
  3,220,288.72

  	
   

  	
  99.69

  	
  %

  	
  3.32

  	
  %

  	
  98.94

  	
  %

  
	
  178

  	
   

  	
  16.55

  	
   

  	
  1,175.99

  	
   

  	
  1,192.54

  	
   

  	
  3,221,481.26

  	
   

  	
  99.72

  	
  %

  	
  3.32

  	
  %

  	
  99.00

  	
  %

  
	
  179

  	
   

  	
  60.20

  	
   

  	
  1,175.99

  	
   

  	
  1,236.19

  	
   

  	
  3,222,717.46

  	
   

  	
  99.76

  	
  %

  	
  3.33

  	
  %

  	
  99.05

  	
  %

  
	
  180

  	
   

  	
  28.80

  	
   

  	
  1,175.99

  	
   

  	
  1,204.79

  	
   

  	
  3,223,922.25

  	
   

  	
  99.80

  	
  %

  	
  3.33

  	
  %

  	
  99.80

  	
  %

  
	
   

  	
   

  	
  3,012,243.24

  	
   

  	
  211,679.01

  	
   

  	
  3,223,922.25

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
   

  	
   

  	
  3,230,383.02

  	
   

  	
  total amount billed to sample population in
  tracking month

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (3,012,243.24)

  	
   

  	
  less amount actually collected days 1-180

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  218,139.78

  	
   

  	
  equals amount unpaid after day 180

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (6,460.77)

  	
   

  	
  less Write-off Factor applied to total
  amount billed

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  211,679.01

  	
   

  	
  equals net amount distributed in column C
  above

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Day

  	
   

  	
  Apr-04

  	
   

  	
  Net

  	
   

  
	
  0

  	
   

  	
  0.00

  	
  %

  	
   

  	
   

  
	
  30

  	
   

  	
  40.41

  	
  %

  	
  40.41

  	
  %

  
	
  60

  	
   

  	
  89.03

  	
  %

  	
  48.62

  	
  %

  
	
  90

  	
   

  	
  92.52

  	
  %

  	
  3.49

  	
  %

  
	
  120

  	
   

  	
  95.41

  	
  %

  	
  2.89

  	
  %

  
	
  150

  	
   

  	
  97.35

  	
  %

  	
  1.94

  	
  %

  
	
  180

  	
   

  	
  99.80

  	
  %

  	
  2.45

  	
  %

  
	
  Write-off
  factor

  	
   

  	
  0.00200

  	
   

  

 

I-A-8

 

V.                                    ESTIMATION TEMPLATE (USING MONTHLY COLLECTIONS
CURVE DESCRIBED ABOVE)

 

Where:

 

	
  Mn

  	
  =

  	
  a Collection Period

  
	
  A

  	
  =

  	
  percentage collected of the total Billed
  DRC Revenues billed during the current Billing Period

  
	
  B

  	
  =

  	
  percentage collected of the total Billed
  DRC Revenues billed during the Billing Period prior to the current Billing
  Period

  
	
  C

  	
  =

  	
  percentage collected of the total Billed
  DRC Revenues billed during the Billing Period two periods prior to the
  current Billing Period

  
	
  D

  	
  =

  	
  percentage collected of the total Billed
  DRC Revenues billed during the Billing Period three periods prior to the
  current Billing Period

  
	
  E

  	
  =

  	
  percentage collected of the total Billed
  DRC Revenues billed during the Billing Period four periods prior to the current
  Billing Period

  
	
  F

  	
  =

  	
  percentage collected of the total Billed
  DRC Revenues billed during the Billing Period five periods prior to the
  current Billing Period

  
	
  R

  	
  =

  	
  Billed DRC Revenues for a Billing Period

  
	
  S

  	
  =

  	
  Estimated DRC Collections for a Collection
  Period

  

Then:

 

DRC Payments estimated to have been received (prior to
any adjustment for any Remittance Shortfall or Excess Remittance or DRC Revenue
Adjustments Not Accounted For in Prior Periods) equal S, as shown in the
Estimation Template below.  An amount of
DRC Payments estimated to have been received (S) is calculated in the aggregate
for all customer classes.

 

	
  Collection Period

  	
   

  	
  Collection Percent

  	
   

  	
  Billed DRC

  Revenues

  	
   

  	
  Estimated

  Collections

  	
   

  
	
  Mn-5

  	
   

  	
  Fn-5

  	
   

  	
  R n-5

  	
   

  	
  (Fn-5)(Rn-5)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  +

  	
   

  
	
  Mn-4

  	
   

  	
  En-4

  	
   

  	
  Rn-4

  	
   

  	
  (En-4)(Rn-4)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  +

  	
   

  
	
  Mn-3

  	
   

  	
  Dn-3

  	
   

  	
  Rn-3

  	
   

  	
  (Dn-3)(Rn-3)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  +

  	
   

  
	
  Mn-2

  	
   

  	
  Cn-2

  	
   

  	
  Rn-2

  	
   

  	
  (Cn-2)(Rn-2)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  +

  	
   

  
	
  Mn-1

  	
   

  	
  Bn-1

  	
   

  	
  Rn-1

  	
   

  	
  (Bn-1)(Rn-1)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  +

  	
   

  
	
  Mn

  	
   

  	
  An

  	
   

  	
  Rn

  	
   

  	
  (An)(Rn)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  =

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Total

  	
   

  	
  Sn

  	
   

  

 

I-A-9

 

Notes:

1.               The Billed DRC
Revenues (R) for multiple prior Billing Periods will be zero during the
six-month phase-in of the DRC Charges following the DRC Effective Date.  Similarly, the Billed DRC Revenues for
multiple succeeding Billing Periods will be zero during the phase-out of the
DRC Charges following the DRC Termination Date.

 

2.               The “Collection
Percent” (either A, B, C, D, E, or F) is the collection percent in effect
at the time the DRC Charges were billed based on the Curve then in effect.

 

VI.                                AGGREGATE MONTHLY REMITTANCE AMOUNT CALCULATION
(USING ESTIMATION TEMPLATE DESCRIBED ABOVE)

 

Where:

 

	
  X

  	
  =

  	
  Excess Remittance or Remittance Shortfall
  for a Collection Period

  
	
  Y

  	
  =

  	
  Retained Collections and DRC Revenue
  Adjustments Not Accounted For in Prior Periods

  
	
  Z

  	
  =

  	
  Aggregate Monthly Remittance Amount

  

 

Then, the Aggregate Monthly Remittance Amount
to be remitted, which includes all customer classes, in month n+1 (Mn+1)
equals Z:

 

	
  Sn for All Consumers

  	
   

  
	
  + or -

  	
   

  
	
  Xn for  All Consumers

  	
   

  
	
  + or -

  	
   

  
	
  Yn

  	
   

  
	
  =

  	
   

  
	
  Z to be remitted at Mn+1

  	
   

  

 

I-A-10

 

ATTACHMENT B

 

to

 

ANNEX I

 

CALCULATION
OF DAILY REMITTANCE AMOUNTS

FOR FIRST
SIX COLLECTION PERIODS

 

I.                                         PURPOSE

 

The purpose of the estimation template
described in Section III of this Attachment B to this Annex is to
calculate the estimated DRC Payments used to determine the Daily Remittance
amount during the first six Collection Periods immediately following the DRC
Effective Date.  The estimation template
more accurately reflects in the DRC Payments the gradual build up of DRC
Payments over the initial six month period immediately after the DRC Effective
Date.

 

II.                                     FACTS
AND ASSUMPTIONS

 

Refer to the Facts and Assumptions in
Attachment A to this Annex.

 

III.                                 ESTIMATION
TEMPLATE (USING THE MONTHLY COLLECTION CURVE DESCRIBED IN ATTACHMENT A TO THIS
ANNEX)

 

Where: 
Refer to the variables listed in Section V. of Attachment A to this
Annex.

 

 

	
  M1

  	
  =

  	
  First Collection Period immediately
  following the DRC Effective Date

  
	
  M2

  	
  =

  	
  Second Collection Period immediately
  following the DRC Effective Date

  
	
  M3

  	
  =

  	
  Third Collection Period immediately
  following the DRC Effective Date

  
	
  M4

  	
  =

  	
  Fourth Collection Period immediately
  following the DRC Effective Date

  
	
  M5

  	
  =

  	
  Fifth Collection Period immediately
  following the DRC Effective Date

  
	
  M6

  	
  =

  	
  Sixth Collection Period immediately
  following the DRC Effective Date

  

 

Then: 
To calculate the estimated daily DRC Payments used to determined Daily
Remittances to be remitted within two Servicer Business Days after each
Servicer Business Day within each of the Collection Periods, the daily Billed
DRC Revenues for a Servicer Business Day within a Collection Period will be
multiplied by the corresponding Collection Percentage Factor shown below for
that Collection Period.

 

I-B-1

 

	
  The Billed DRC

  Revenues for Each

  Servicer Business

  Day Within the

  Following

  Collection Periods:

  	
   

  	
  Multiplied By the

  Following

  Corresponding

  Collection Percentage

  Factors:

  	
   

  	
  Shall Equal the Daily DRC Payments

  Used To Determine Daily

  Remittances

  	
   

  
	
  M1

  	
   

  	
  A

  	
   

  	
  Daily DRC
  Payments For Servicer Business Days within M1

  	
   

  
	
  M2

  	
   

  	
  A+[(1/2)(B)]

  	
   

  	
  Daily DRC
  Payments For Servicer Business Days within M2

  	
   

  
	
  M3

  	
   

  	
  A+B+[(1/2)(C)]

  	
   

  	
  Daily DRC
  Payments For Servicer Business Days within M3

  	
   

  
	
  M4

  	
   

  	
  A+B+C+[(1/2)(D)]

  	
   

  	
  Daily DRC
  Payments For Servicer Business Days within M4

  	
   

  
	
  M5

  	
   

  	
  A+B+C+D+[(1/2)(E)]

  	
   

  	
  Daily DRC
  Payments For Servicer Business Days within M5

  	
   

  
	
  M6

  	
   

  	
  A+B+C+D+E+[(1/2)(F)]

  	
   

  	
  Daily DRC
  Payments For Servicer Business Days within M6

  	
   

  

 

The last Collection Percent in each of the Collection Percentage
Factors is multiplied by 1/2 to more accurately reflect
the day-by-day increase in the number of days of usage to which the DRC Charge
is applied to bills generated each day during the first Collection Period.

 

I-B-2Exhibit 4(a)

 

 

 

 

Quixote
Corporation, Issuer

 

 

LaSalle
Bank National Association,

 

 

as Trustee

 

 

INDENTURE

 

Dated
as of February 9, 2005

 

 

7%
Convertible Senior Subordinated Notes due 2025

 

 

 

CROSS-REFERENCE TABLE*

 

Provisions
of Trust Indenture Act of 1939 and Indenture, dated as of February 9,
2005, between Quixote Corporation and LaSalle Bank National Association, as
Trustee, providing for the 7% Convertible Senior Subordinated Notes due 2025:

 

	
  Section of the Act

  	
   

  	
  Section of Indenture

  
	
  310(a)(1) and (2)

  	
   

  	
  8.9

  
	
  310(a)(3) and (4)

  	
   

  	
  N.A.**

  
	
  310(b)

  	
   

  	
  8.8 and 8.10(b) and (d)

  
	
  310(c)

  	
   

  	
  N.A.

  
	
  311(a)

  	
   

  	
  8.13

  
	
  311(b)

  	
   

  	
  8.13

  
	
  311(c)

  	
   

  	
  N.A.

  
	
  312(a)

  	
   

  	
  6.1 and 6.2(a)

  
	
  312(b)

  	
   

  	
  6.2(b)

  
	
  312(c)

  	
   

  	
  6.2(c)

  
	
  313(a)

  	
   

  	
  6.3(a)

  
	
  313(b)(1)

  	
   

  	
  N.A.

  
	
  313(b)(2)

  	
   

  	
  6.3(a)

  
	
  313(c)

  	
   

  	
  6.3(a)

  
	
  313(d)

  	
   

  	
  6.3(b)

  
	
  314(a)

  	
   

  	
  6.4

  
	
  314(b)

  	
   

  	
  17.4

  
	
  314(c)(1) and (2)

  	
   

  	
  18.5

  
	
  314(c)(3)

  	
   

  	
  17.6

  
	
  314(d)

  	
   

  	
  N.A.

  
	
  314(e)

  	
   

  	
  18.5

  
	
  314(f)

  	
   

  	
  N.A.

  
	
  315(a), (c) and (d)

  	
   

  	
  8.1

  
	
  315(b)

  	
   

  	
  7.8

  
	
  315(e)

  	
   

  	
  7.9

  
	
  316(a)(1)

  	
   

  	
  7.7

  
	
  316(a)(2)

  	
   

  	
  Not required

  
	
  316(a) (last sentence)

  	
   

  	
  9.4

  
	
  316(b)

  	
   

  	
  11.2

  

 

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

 

** N.A. means Not Applicable.

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Definitions

  	
   

  
	
  Section 1.2

  	
  Other Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.1

  	
  Designation,
  Amount and Issue of Notes

  	
   

  
	
  Section 2.2

  	
  Form of Notes

  	
   

  
	
  Section
  2.3

  	
  Date
  and Denomination of Notes; Payments of Interest

  	
   

  
	
  Section 2.4

  	
  Execution of Notes

  	
   

  
	
  Section
  2.5

  	
  Exchange
  and Registration of Transfer of Notes; Restrictions on Transfer

  	
   

  
	
  Section
  2.6

  	
  Mutilated,
  Destroyed, Lost or Stolen Notes

  	
   

  
	
  Section 2.7

  	
  Temporary Notes

  	
   

  
	
  Section
  2.8

  	
  Cancellation
  of Notes Paid, Etc.

  	
   

  
	
  Section 2.9

  	
  CUSIP Numbers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III OPTIONAL REDEMPTION OF NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
  Redemption Price

  	
   

  
	
  Section
  3.2

  	
  Notice
  of Redemption; Selection of Notes

  	
   

  
	
  Section
  3.3

  	
  Payment
  of Notes Called for Redemption

  	
   

  
	
  Section
  3.4

  	
  Conversion
  Arrangement on Call for Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV SUBORDINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.1

  	
  Subordination
  to Senior Indebtedness

  	
   

  
	
  Section
  4.2

  	
  No
  Payment if Default in Senior Indebtedness

  	
   

  
	
  Section 4.3

  	
  Payment upon
  Dissolution, Etc.

  	
   

  
	
  Section 4.4

  	
  Payments on Notes

  	
   

  
	
  Section
  4.5

  	
  Certain
  Conversions Deemed Payment

  	
   

  
	
  Section 4.6

  	
  Subrogation

  	
   

  
	
  Section 4.7

  	
  Rights of
  Holders Unimpaired

  	
   

  
	
  Section 4.8

  	
  Holders of
  Senior Indebtedness

  	
   

  
	
  Section
  4.9

  	
  Trustee
  Not Fiduciary for Holders of Senior Indebtedness

  	
   

  
	
  Section
  4.10

  	
  Rights
  of Trustee as Holder of Senior Indebtedness; Preservation of Trustee’s Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V PARTICULAR COVENANTS OF THE COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  5.1

  	
  Payment
  of Principal, Premium and Interest

  	
   

  
	
  Section 5.2

  	
  Maintenance
  of Office or Agency

  	
   

  
	
  Section
  5.3

  	
  Appointments
  to Fill Vacancies in Trustee’s Office

  	
   

  

 

i

 

	
  Section
  5.4

  	
  Provisions
  as to Paying Agent

  	
   

  
	
  Section 5.5

  	
  Existence

  	
   

  
	
  Section 5.6

  	
  Information
  Requirement

  	
   

  
	
  Section 5.7

  	
  Stay,
  Extension and Usury Laws

  	
   

  
	
  Section 5.8

  	
  Compliance
  Certificate

  	
   

  
	
  Section 5.9

  	
  Further
  Instruments and Acts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI NOTEHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
  Noteholders Lists

  	
   

  
	
  Section
  6.2

  	
  Preservation
  and Disclosure of Lists

  	
   

  
	
  Section 6.3

  	
  Reports by Trustee

  	
   

  
	
  Section 6.4

  	
  Reports by Company

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII DEFAULTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
  Events of Default

  	
   

  
	
  Section
  7.2

  	
  Payments
  of Notes on Default; Suit Therefor

  	
   

  
	
  Section
  7.3

  	
  Application
  of Monies Collected by Trustee

  	
   

  
	
  Section 7.4

  	
  Proceedings by
  Noteholder

  	
   

  
	
  Section 7.5

  	
  Proceedings by
  Trustee

  	
   

  
	
  Section
  7.6

  	
  Remedies
  Cumulative and Continuing

  	
   

  
	
  Section
  7.7

  	
  Direction
  of Proceedings and Waiver of Defaults by Majority of Noteholders

  	
   

  
	
  Section 7.8

  	
  Notice of Defaults

  	
   

  
	
  Section 7.9

  	
  Undertaking to Pay
  Costs

  	
   

  
	
  Section 7.10

  	
  Delay or
  Omission Not Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII CONCERNING THE TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.1

  	
  Duties
  and Responsibilities of Trustee

  	
   

  
	
  Section
  8.2

  	
  Reliance
  on Documents, Opinions, Etc.

  	
   

  
	
  Section
  8.3

  	
  No
  Responsibility for Recitals, Etc.

  	
   

  
	
  Section
  8.4

  	
  Trustee,
  Paying Agents, Conversion Agents or Note Registrar May Own Notes

  	
   

  
	
  Section 8.5

  	
  Monies to be
  Held in Trust

  	
   

  
	
  Section
  8.6

  	
  Compensation
  and Expenses of Trustee

  	
   

  
	
  Section
  8.7

  	
  Officer’s
  Certificate as Evidence

  	
   

  
	
  Section
  8.8

  	
  Conflicting
  Interests of Trustee

  	
   

  
	
  Section 8.9

  	
  Eligibility of
  Trustee

  	
   

  
	
  Section
  8.10

  	
  Resignation
  or Removal of Trustee

  	
   

  
	
  Section
  8.11

  	
  Acceptance
  by Successor Trustee

  	
   

  
	
  Section 8.12

  	
  Succession by
  Merger, Etc.

  	
   

  
	
  Section
  8.13

  	
  Limitation
  on Rights of Trustee as Creditor

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX CONCERNING THE NOTEHOLDERS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.1

  	
  Action by Noteholders

  	
   

  
	
  Section
  9.2

  	
  Proof of
  Execution by Noteholders

  	
   

  

 

ii

 

	
  Section 9.3

  	
  Who Are
  Deemed Absolute Owners

  	
   

  
	
  Section 9.4

  	
  Company-Owned
  Notes Disregarded

  	
   

  
	
  Section
  9.5

  	
  Revocation
  of Consents; Future Holders Bound

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  X NOTEHOLDERS’ MEETINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.1

  	
  Purpose of Meetings

  	
   

  
	
  Section 10.2

  	
  Call of
  Meetings by Company or Noteholders

  	
   

  
	
  Section
  10.3

  	
  Call
  of Meetings by Company or Noteholders

  	
   

  
	
  Section 10.4

  	
  Qualifications
  for Voting

  	
   

  
	
  Section 10.5

  	
  Regulations

  	
   

  
	
  Section 10.6

  	
  Voting

  	
   

  
	
  Section 10.7

  	
  No Delay of
  Rights by Meeting

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XI AMENDMENTS; SUPPLEMENTAL INDENTURES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  11.1

  	
  Amendments;
  Supplemental Indentures without Consent of Noteholders

  	
   

  
	
  Section
  11.2

  	
  Amendments;
  Supplemental Indentures with Consent of Noteholders

  	
   

  
	
  Section
  11.3

  	
  Effect
  of Amendments and Supplemental Indentures

  	
   

  
	
  Section 11.4

  	
  Notation on Notes

  	
   

  
	
  Section
  11.5

  	
  Evidence
  of Compliance of Amendment or Supplemental Indenture to be Furnished to
  Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XII CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.1

  	
  Company
  May Consolidate, Etc.

  	
   

  
	
  Section
  12.2

  	
  Successor
  Entity to be Substituted

  	
   

  
	
  Section
  12.3

  	
  Opinion
  of Counsel to be Given Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIII SATISFACTION AND DISCHARGE OF INDENTURE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.1

  	
  Discharge of
  Indenture

  	
   

  
	
  Section
  13.2

  	
  Deposited
  Monies to be Held in Trust by Trustee

  	
   

  
	
  Section
  13.3

  	
  Paying
  Agent to Repay Monies Held

  	
   

  
	
  Section 13.4

  	
  Return of
  Unclaimed Monies

  	
   

  
	
  Section 13.5

  	
  Reinstatement

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIV NO RECOURSE AGAINST OTHERS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.1

  	
  Indenture
  and Notes Solely Corporate Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XV CONVERSION OF NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 15.1

  	
  Right to Convert

  	
   

  
	
  Section
  15.2

  	
  Exercise
  of Conversion Privilege; Issuance of Common Stock on Conversion

  	
   

  
	
  Section
  15.3

  	
  Company
  Right to Force Automatic Conversion

  	
   

  
	
  Section
  15.4

  	
  Cash
  Payments in Lieu of Fractional Shares

  	
   

  
	
  Section 15.5

  	
  Conversion Price

  	
   

  
	
  Section
  15.6

  	
  Adjustment
  of Conversion Price

  	
   

  

 

iii

 

	
  Section
  15.7

  	
  Effect
  of Reclassification, Consolidation, Merger or Sale

  	
   

  
	
  Section 15.8

  	
  Taxes on Shares
  Issued

  	
   

  
	
  Section
  15.9

  	
  Reservation
  of Shares; Shares to be Fully Paid; Listing of Common Stock

  	
   

  
	
  Section 15.10

  	
  Responsibility
  of Trustee

  	
   

  
	
  Section
  15.11

  	
  Notice
  to Holders Prior to Certain Actions

  	
   

  
	
  Section
  15.12

  	
  Holder
  Not Deemed a Shareholder

  	
   

  
	
  Section
  15.13

  	
  Adjustment
  to Conversion Price Following Certain Changes of Control

  	
   

  
	
  Section
  15.14

  	
  Payment
  of Additional Conversion Payment and Company Conversion Provisional Payment.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XVI REPURCHASE RIGHT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 16.1

  	
  Repurchase Right

  	
   

  
	
  Section
  16.2

  	
  Notices;
  Method of Exercising Repurchase Right, Etc.

  	
   

  
	
  Section 16.3

  	
  Certain Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XVII MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  17.1

  	
  Provisions
  Binding on Company’s Successors

  	
   

  
	
  Section
  17.2

  	
  Official
  Acts by Successor Corporation

  	
   

  
	
  Section 17.3

  	
  Addresses for
  Notices, Etc.

  	
   

  
	
  Section
  17.4

  	
  Governing
  Law; Jurisdiction; Jury Trial

  	
   

  
	
  Section
  17.5

  	
  Evidence
  of Compliance with Conditions Precedent; Certificates to Trustee

  	
   

  
	
  Section 17.6

  	
  Legal Holidays

  	
   

  
	
  Section 17.7

  	
  Trust Indenture Act

  	
   

  
	
  Section 17.8

  	
  Benefits of
  Indenture

  	
   

  
	
  Section
  17.9

  	
  Table of
  Contents, Headings, Etc.

  	
   

  
	
  Section 17.10

  	
  Authenticating Agent

  	
   

  
	
  Section 17.11

  	
  Execution in
  Counterparts

  	
   

  
	
  Section
  17.12

  	
  No
  Adverse Interpretation of Other Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  Form
  of 7% Convertible Senior Subordinated Note due 2025

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  B

  	
  Form
  of Conversion Notice

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  C

  	
  Form
  of Option to Elect Repayment Upon a Repurchase Date

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  D

  	
  Form
  of Certificate of Transfer

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  E

  	
  Form
  of Certificate of Exchange

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  F

  	
  Form
  of Transfer Letter of Representations

  	
   

  

 

iv

 

INDENTURE
dated as of February 9, 2005 between Quixote Corporation, a Delaware
corporation (hereinafter sometimes called the “Company”, as more fully set
forth in Section 1.1), and LaSalle Bank National Association, a national
banking association, as trustee (hereinafter sometimes called the “Trustee”, as
more fully set forth in Section 1.1).

 

W I T N E S S E T H:

 

WHEREAS,
for its lawful corporate purposes, the Company has duly authorized the issue of
its 7% Convertible Senior Subordinated Notes due 2025 (hereinafter sometimes
called the “Notes”), initially in an aggregate principal amount not to exceed Forty
Million United States Dollars ($40,000,000) and to provide the terms and
conditions upon which the Notes are to be authenticated, issued and delivered,
the Company has duly authorized the execution and delivery of this Indenture;
and

 

WHEREAS,
the Notes, the certificate of authentication to be borne by the Notes, a form
of assignment, a form of option to elect repayment upon a Repurchase Event, a
form of option to elect repayment on a Repurchase Date (as defined herein), and
a form of conversion notice and transfer to be borne by the Notes are to be
substantially in the forms hereinafter provided for; and

 

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

 

NOW,
THEREFORE, THIS INDENTURE WITNESSETH:

 

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

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                                      Definitions

 

144A
Global Note: The term “144A Global Note” means the Global
Note substantially in the form of Exhibit A hereto bearing the
Global Note Legend and the Private Placement Legend and deposited with or on
behalf of, and registered in the name of, the Depositary or its nominee that
will be issued in a denomination equal to the outstanding principal amount of
the Notes sold in reliance on Rule 144A.

 

 

Affiliate:  The term “Affiliate” of any specified Person
shall mean 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 specified Person means the power to direct or
cause the direction of 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.

 

Applicable Procedures:  The term “Applicable
Procedures” shall mean, with respect to any transfer or
exchange of beneficial ownership interests in a Global Note, the rules and
procedures of the Depositary that are applicable to such transfer or exchange.

 

Board
of Directors:  The term
“Board of Directors” shall mean the Board of Directors of the Company or a
committee of such Board of Directors duly authorized to act for it hereunder
(to the extent permitted by applicable law).

 

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

 

Business
Day:  The term “Business
Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which the banking institutions in the City of New York or the city in
which the Corporate Trust Office is located are authorized or obligated by law
or executive order to close or be closed.

 

Close
of business:  The term “close
of business” means 5 p.m. (New York City time).

 

Commission:  The term “Commission” shall mean the
Securities and Exchange Commission.

 

Common
Stock:  The term “Common
Stock” shall mean any stock of any class of the Company which has 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, which is not
subject to redemption by the Company and which entitles the holder thereof to
vote generally for the election of directors. 
Subject to the provisions of Section 15.6, however, shares issuable
on conversion of Notes shall include only shares of the class designated as
common stock of the Company at the date of this Indenture or shares of any
class or classes resulting from any reclassification or reclassifications
thereof and 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 that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion 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.

 

2

 

Company:  The term “Company” shall mean Quixote
Corporation, a Delaware corporation, and subject to the provisions of Article XII,
shall include its successors and assigns.

 

Conversion
Shares:  The term “Conversion
Shares” means all shares of Common Stock into which the Notes are convertible
pursuant to Article XV of this Indenture.

 

Corporate
Trust Office:  The term
“Corporate Trust Office,” or other similar term, shall mean the office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which office is, at the date as of which this
Indenture is dated, located at 135 South LaSalle Street, Suite 1960, Chicago,
Illinois 60603.

 

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

 

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

 

Definitive Note:  The term “Definitive
Note” shall mean a certificated Note registered in the name of the holder
thereof and issued in accordance with Section 2.5, substantially in the
form of Exhibit A hereto except that such Note shall not bear the Global
Note Legend and shall not have the “Schedule of Exchanges of Interests in
the Global Note” attached thereto.

 

Depositary:  The term “Depositary” shall mean, with
respect to the Notes issuable or issued in whole or in part in global form, The
Depository Trust Company, its nominees, and their respective successors.

 

Designated
Senior Debt:  The term “Designated
Senior Debt” shall mean (i) any Senior Indebtedness consisting of indebtedness
for borrowed money which, at the time of determination, has an aggregate
principal amount of at least Ten Million United States Dollars ($10,000,000) if
the instrument creating or evidencing the same or the assumption or guarantee
thereof (or related agreements or documents to which the Company or any
Subsidiary is a party) expressly provides that such indebtedness shall be “Designated
Senior Debt” for purposes of this Indenture (provided that such instrument,
agreement or other document may place limitations and conditions on the right
of the holders of such Senior Indebtedness to exercise the rights of holders of
Designated Senior Debt) and (ii) the Senior Facility.  If any payment made to any holder of any
Designated Senior Debt with respect to such Designated Senior Debt is rescinded
or must otherwise be returned by such holder upon the insolvency, bankruptcy or
reorganization of the Company or any Subsidiary or otherwise, the reinstated
indebtedness of the Company or such subsidiary arising as a result of such
rescission or return shall constitute Designated Senior Debt effective as of
the date of such rescission or return.

 

Equity
Interests:  The term “Equity
Interests” shall mean capital stock or warrants, options or other rights to
subscribe for, acquire or receive capital stock (but excluding any debt
security which is convertible into, or exchangeable for, capital stock).

 

3

 

Event
of Default:  The term “Event
of Default” shall mean any event specified in Section 7.1, continued for
the period of time, if any, and after the giving of notice, if any, therein
designated.

 

Exchange
Act:  The term “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 

GAAP:  The term “GAAP” means generally accepted
accounting principles in the United States as in effect on the date of this
Indenture, applied on a consistent basis.

 

Global
Notes:  The term “Global
Notes” shall mean, individually and collectively, each of the Restricted Global
Notes and the Unrestricted Global Notes, issued in accordance with Section 2.2,
2.5(c)(iv) or 2.5(e)(ii).

 

Global
Note Legend:  The term “Global Note Legend” shall mean the
legend set forth in Section 2.5(h)(iii), which is
required to be placed on all Global Notes issued under this Indenture.

 

IAI
Global Note:  The term “IAI
Global Note” shall mean the Global Note substantially in the form of Exhibit A
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that shall be issued in a denomination equal to the outstanding
principal amount of the Notes held by Institutional Accredited Investors or
Individual Accredited Investors.

 

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

 

Individual Accredited Investor:  The term “Individual Accredited Investor”
shall mean an individual “accredited investor” as defined in Rule 501(a) (5) or
(6) of Regulation D under the Securities Act.

 

Indirect
Participant:  The term “Indirect
Participant” shall mean a Person who holds a beneficial interest in a Global
Note through a Participant.

 

Institutional Accredited Investor:  The term “Institutional Accredited Investor”
shall mean an institutional “accredited investor” as such term is defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act or any entity in which
all of the equity owners are accredited investors within the meaning of Rule
501(a)(1), (2), (3), (5), (6) or (7) under the Securities Act.

 

Liquidated Damages:  The term “Liquidated Damages” means all
liquidated damages then owing pursuant to Section 2(f) of the Registration
Rights Agreement and Section 15.2.

 

Note
or Notes:  The terms “Note”
or “Notes” shall mean any Note or Notes, as the case may be, authenticated and
delivered under this Indenture.

 

4

 

Noteholder
or holder:  The terms “Noteholder”
or “holder” as applied to any Note, or other similar terms (but excluding the
term “beneficial holder”), shall mean any Person in whose name at the time a
particular Note is registered on the Note Register.

 

Officer’s
Certificate:  The term “Officer’s
Certificate”, when used with respect to the Company, shall mean a certificate
signed by one of the President, the Chief Executive Officer, Chief Financial
Officer, Executive or Senior Vice President or any Vice President,
that is delivered to the Trustee. 
Each such certificate shall include the statements provided for in Section 17.5
if and to the extent required by the provisions of such Section.

 

Opinion
of Counsel:  The term “Opinion
of Counsel” shall mean an opinion in writing signed by legal counsel, who may
be an employee of or counsel to the Company, which is delivered to the
Trustee.  Each such opinion shall include
the statements provided for in Section 17.5 if and to the extent required
by the provisions of such Section.

 

Outstanding:  The term “outstanding,” when used with
reference to Notes, shall, subject to the provisions of Section 9.4, mean,
as of any particular time, all Notes authenticated and delivered by the Trustee
under this Indenture, except:

 

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

 

(b)                                 Notes,
or portions thereof, for the payment, or redemption of which monies in the
necessary amount shall have been deposited in trust with the Trustee or with
any paying agent (other than the Company) or shall have been set aside and
segregated in trust by the Company (if the Company shall act as its own paying
agent); provided that if such Notes are to be redeemed, as the case may
be, prior to the maturity thereof, notice of such redemption shall have been
given as provided in Section 3.2, or provision satisfactory to the Trustee
shall have been made for giving such notice;

 

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

 

(d)                                 Notes
converted into Common Stock pursuant to Article XV and Notes deemed not
outstanding pursuant to Section 3.2.

 

Participant:  The term “Participant” shall mean, with
respect to the Depositary, a Person who has an account with the Depositary.

 

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

 

Predecessor
Note:  The term “Predecessor
Note” of any particular Note shall mean every previous Note evidencing all or a
portion of the same debt as that evidenced by such particular 

 

5

 

Note; and, for the purposes of this definition, any Note authenticated
and delivered under Section 2.6 in lieu of a lost, destroyed or stolen
Note shall be deemed to evidence the same debt as the lost, destroyed or stolen
Note that it replaces.

 

Private
Placement Legend:  The
term “Private Placement Legend” shall mean the legend set forth in Section 2.5(h)(i) to be placed on all Notes issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.

 

QIB:  The term “QIB” shall mean a “qualified
institutional buyer” as defined in Rule 144A.

 

Registration
Rights Agreement:  The
term “Registration Rights Agreement” means that certain Registration Rights
Agreement, dated as of February 9, 2005, among the Company and the Buyers
as defined therein, as such agreement may be amended from time to time.

 

Representative:  The term “Representative” shall mean (a) the
indenture trustee or other trustee, agent or representative for holders of
Senior Indebtedness or (b) with respect to any Senior Indebtedness that does
not have any 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.

 

Responsible
Officer:  The term “Responsible
Officer” shall mean, when used with respect to the Trustee, any officer within
the corporate trust department of the Trustee, including any vice president,
assistant vice president, assistant treasurer, trust officer or any other
officer of the Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of such person’s
knowledge of and familiarity with the particular subject and who shall have
direct responsibility for the administration of this Indenture.

 

Restricted
Definitive Note:  The
term “Restricted Definitive Note” means a Definitive Note bearing the Private
Placement Legend.

 

Restricted
Global Note:  The term “Restricted
Global Note” shall mean a permanent Global Note substantially in the form of Exhibit
A attached hereto that bears the Global Note Legend and that has the “Schedule of
Exchanges of Interests in the Global Note” attached thereto, and that is
deposited with or on behalf of and registered in the name of the Depositary,
representing a series of Notes that bear the Private Placement Legend.

 

Rule
144: The term “Rule 144” shall mean Rule 144 promulgated
under the Securities Act.

 

Rule 144A: The term “Rule 144A” shall mean Rule 144A
promulgated under the Securities Act.

 

6

 

Securities
Act:  The term “Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

Securities
Purchase Agreement: 
The term “Securities Purchase Agreement” means that certain Securities
Purchase Agreement, dated as of February 9, 2005, among the Company and
the parties listed on the Schedule of Buyers attached thereto as Exhibit
A, as such agreement may be amended from time to time.

 

Senior
Facility:  The term “Senior
Facility” means the senior credit facility under that certain Credit Agreement
dated as of May 16, 2003 among the Company, and the Northern Trust
Company, LaSalle Bank National Association, Harris Trust and Savings Bank and
National City Bank of Michigan/Illinois, as lenders (the “Lenders”), together
with the documents now or hereafter related thereto (including without
limitation, any guarantee agreements and any security documents), in each case
as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing, increasing the
amount of, or otherwise restructuring all or any portion of the indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders (or other
institutions).

 

Shelf
Registration Statement: 
The term “Shelf Registration Statement” means the Shelf Registration
Statement contemplated by the Registration Rights Agreement.

 

Significant
Subsidiary: The term “Significant Subsidiary” shall have the
meaning assigned to that term in Rule 1-02(w) of Regulation S-X promulgated
under the Securities Exchange Act of 1934, as amended.

 

Subsidiary:  The term “Subsidiary” means a Person more
than 50% of the outstanding voting stock or Equity Interests of which is owned,
directly or indirectly, by the Company or by one or more other Subsidiaries, or
by the Company and one or more other Subsidiaries.  For the purposes of this definition, “voting
stock” means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.

 

Transaction
Documents:  The term “Transaction
Documents” shall mean the Securities Purchase Agreement, the Registration
Rights Agreement, the Notes, the Indenture and each of the other agreements
entered into by the parties thereto in connection with the transactions
contemplated by the Securities Purchase Agreement.

 

Trust
Indenture Act:  The
term “Trust Indenture Act” shall mean the Trust Indenture Act of 1939, as
amended, as it was in force at the date of execution of this Indenture, except
as provided in Sections 11.3 and 15.7; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after the date
hereof, the term “Trust Indenture Act” shall mean, to the extent required by
such amendment, the Trust Indenture Act of 1939 as so amended.

 

Trustee:  The term “Trustee” shall mean LaSalle Bank
National Association and its successors and any corporation resulting from or
surviving any consolidation or merger to which 

 

7

 

it or its successors may be a
party and any successor trustee at the time serving as successor trustee
hereunder.

 

Unrestricted Global Note: 
The term “Unrestricted Global Note” shall mean a permanent Global Note
substantially in the form of Exhibit A attached hereto that bears the
Global Note Legend and that has the “Schedule of Exchanges of Interests in
the Global Note” attached thereto, and that is deposited with or on behalf of
and registered in the name of the Depositary, representing a series of Notes
that do not bear and are not required to bear the Private Placement Legend.

 

Unrestricted
Definitive Note:  The
term “Unrestricted Definitive Note” shall mean one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.

 

Section 1.2                                      Other
Definitions

 

	
  Term

  	
   

  	
  Defined
  in

  Section

  
	
  “Additional Securities”

  	
   

  	
  15.6(d)

  
	
  “Additional Shares”

  	
   

  	
  15.13

  
	
  “Agent Members”

  	
   

  	
  2.2(b)

  
	
  “Authentication Order”

  	
   

  	
  2.1

  
	
  “Automatic Conversion Date”

  	
   

  	
  15.3

  
	
  “Change in Control”

  	
   

  	
  16.3(e)

  
	
  “Closing Price”

  	
   

  	
  15.6(e)(1)

  
	
  “Company Conversion Provisional Payment”

  	
   

  	
  15.3

  
	
  “Company Notice”

  	
   

  	
  16.2(a)

  
	
  “Continuing Director”

  	
   

  	
  16.3(c)

  
	
  “Conversion Date”

  	
   

  	
  15.2

  
	
  “Conversion Notice”

  	
   

  	
  15.2

  
	
  “Conversion Price”

  	
   

  	
  15.5

  
	
  “Current Market Price”

  	
   

  	
  15.6(e)(2)

  
	
  “Effective Date”

  	
   

  	
  15.13

  
	
  “fair market value”

  	
   

  	
  15.6(e)(4)

  
	
  “Interest Payment Date”

  	
   

  	
  2.3

  
	
  “non-electing share”

  	
   

  	
  15.7

  
	
  “Note Register”

  	
   

  	
  2.5(a)

  
	
  “Note Registrar”

  	
   

  	
  2.5(a)

  
	
  “Payment Blockage Notice”

  	
   

  	
  4.2

  
	
  “Payment Blockage Period”

  	
   

  	
  4.2

  
	
  “Payment Default”

  	
   

  	
  4.2

  
	
  “Proceeding”

  	
   

  	
  4.3(a)

  
	
  “record date”

  	
   

  	
  2.3

  
	
  “Record Date”

  	
   

  	
  15.6(e)(4)

  
	
  “Reference Period”

  	
   

  	
  15.6(d)

  
	
  “Repurchase Date”

  	
   

  	
  16.1

  
	
  “Repurchase Event”

  	
   

  	
  16.3(d)

  

 

8

 

	
  Term

  	
   

  	
  Defined
  in

  Section

  
	
  “Repurchase Price”

  	
   

  	
  16.1

  
	
  “Restricted Securities”

  	
   

  	
  2.5(h)(i)

  
	
  “Senior Indebtedness”

  	
   

  	
  4.1

  
	
  “Statutory Exchange”

  	
   

  	
  15.7

  
	
  “Stock Price”

  	
   

  	
  15.13

  
	
  “Termination of Trading”

  	
   

  	
  16.3(f)

  
	
  “Trading Day”

  	
   

  	
  15.6(e)(5)

  
	
  “Trigger Event”

  	
   

  	
  15.6(d)

  
	
  “Vice President”

  	
   

  	
  2.1

  
	
  “Voting Stock”

  	
   

  	
  16.3(e)

  

 

Section 1.3                                      Rules
of Construction

 

All
other terms used in this Indenture, which are defined in the Trust Indenture
Act or which are by reference therein defined in the Securities Act (except as
herein otherwise expressly provided or unless the context otherwise requires)
shall have the meanings assigned to such terms in the Trust Indenture Act and
in the Securities Act as in force at the date of the execution of this
Indenture.  The words “herein,” “hereof,”
“hereunder,” and words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision.  The terms defined in this Article I
include the plural as well as the singular.

 

ARTICLE II

 

ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE
OF NOTES

 

Section 2.1                                      Designation,
Amount and Issue of Notes

 

The Notes shall be designated as “7% Convertible
Senior Subordinated Notes due 2025.” 
Notes not to exceed the aggregate principal amount of Forty Million
United States Dollars ($40,000,000) upon the execution of this Indenture, or
(except pursuant to Sections 2.5, 2.6, 3.3, 15.2 and 16.2) from time
to time thereafter, may be executed by the Company and delivered to the Trustee
for authentication, and the Trustee shall thereupon authenticate and deliver
said Notes upon the written order of the Company (the “Authentication Order”),
signed by the Company’s (a) President, Chief Executive Officer, Executive
or Senior Vice President or any Vice President (whether or not designated by a
number or numbers or word or words added before or after the title, a “Vice
President”) and (b) Chief Financial Officer, Treasurer or Assistant
Treasurer or its Secretary or any Assistant Secretary, without any further
action by the Company hereunder hereunder provided, however, that additional Notes
may be issued in an unlimited aggregate principal amount so long as such Notes
are executed, delivered or authenticated at a price that would not cause such
Notes to have “original issue discount” within the meaning of Section 1273
of the Internal Revenue Code of 1986, as amended, and such Notes are issued at
or above par.

 

9

 

Section 2.2                                      Form of Notes

 

(a)                                  Notes
issued in global form shall be substantially in the form of Exhibit A
attached hereto (including the Global Note Legend thereon and the “Schedule of
Exchanges of Interests in the Global Note” attached thereto), which is
incorporated in and made a part of this Indenture.  Notes issued in definitive form shall be
substantially in the form of Exhibit A attached
hereto (but without the Global Note Legend thereon and without the “Schedule of
Exchanges of Interests in the Global Note” attached thereto).  Each Global Note shall represent such of the
outstanding Notes as shall be specified therein and each shall provide that it
shall represent the aggregate principal amount of outstanding Notes from time
to time endorsed thereon and that the aggregate principal amount of outstanding
Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect purchases, conversions and redemptions.  Any endorsement of a Global Note to reflect
the amount of any decrease or increase in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the holder thereof as required by Section 2.5.

 

The Trustee’s
certificate of authentication to be borne by such Notes shall be substantially
in the form set forth in Exhibit A.

 

Any of the Notes
may have such letters, numbers or other marks of identification and such
notations, legends and endorsements as the officers executing the same may
approve (execution thereof to be conclusive evidence of such approval) and as
are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any securities exchange or automated
quotation system on which the Notes may be listed or designated for issuance,
or to conform to usage.

 

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

 

(b)                                 Members of, or Participants in, the
Depositary (“Agent Members”) shall have no rights under this Indenture with
respect to any Global Note held on their behalf by the Depositary or under any
Global Note, 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 Note for all purposes
whatsoever.  Notwithstanding the
foregoing, nothing herein shall (i) 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
(ii) 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 Note.

 

10

 

Section 2.3                                      Date and
Denomination of Notes; Payments of Interest

 

The
Notes shall be issuable in registered form without coupons in denominations of
One Thousand United States Dollars ($1,000) principal amount and integral
multiples thereof.  Every Note shall be
dated the date of its authentication, and shall bear interest on the principal
sum outstanding from time to time under the Note, at the rate per annum
specified in the title of the form of Note attached as Exhibit A hereto,
accrued from the date of issuance of the Note and payable semi-annually on February 15
and August 15 of each year (each, an “Interest Payment Date”), commencing August 15,
2005, as specified on the face of the form of Note attached as Exhibit A
hereto.

 

Interest
on the Notes shall be deemed to have commenced accruing on February 9,
2005.

 

The
Person in whose name any Note, or portion thereof (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
Interest Payment Date (including any Note that is converted after the record
date and on or before the Interest Payment Date) shall be entitled to receive
the interest payable on such Interest Payment Date notwithstanding the
cancellation of such Note upon any transfer, exchange or conversion subsequent
to the record date and on or prior to such Interest Payment Date; provided
that, in the case of any Note, or portion thereof, called for redemption or
converted pursuant to Article III or Article XV on a redemption date
or conversion date, as applicable, or repurchased by the Company pursuant to Article XVI
on a Repurchase Date, during the period from the close of business on the
record date to the close of business on the Business Day next preceding the
following Interest Payment Date, interest shall not be paid to the Person in
whose name the Note, or portion thereof, is registered on the close of business
on such record date, and the Company shall have no obligation to pay interest
on such Note or portion thereof except to the extent required to be paid upon
such redemption, conversion or repurchase in accordance with Article III, Article XV
or Article XVI.  Interest may, at
the option of the Company, be paid by check mailed to the address of such
Person on the Note Register; provided that, with respect to any holder
of Notes with an aggregate principal amount equal to or in excess of Five
Hundred Thousand United States Dollars ($500,000), interest on such holder’s
Notes shall be paid by wire transfer in immediately available funds to any bank
located in the United States in accordance with the wire transfer instruction
supplied by such holder from time to time to the Trustee and paying agent (if
different from Trustee) at least five (5) Business Days prior to the applicable
record date.  The term “record date” with
respect to any Interest Payment Date shall mean the 4th day of the month in
which the Interest Payment Date shall occur, whether or not such date is a
Business Day.  Interest on the Notes
shall be computed on the basis of a 360-day year comprised of twelve 30-day
months.  Any accrued and unpaid interest
which is not paid within five (5) Business Days of the Interest Payment Date on
which such payment of interest was due shall bear interest at the rate of 12%
per annum from such Interest Payment Date until the same is paid in full (or,
if less, the maximum interest rate then permitted by applicable law) (the “Default
Interest”).

 

If the
Company defaults in a payment of interest on the Notes, it shall pay the
defaulted interest in any lawful manner plus, to the extent lawful, the Default
Interest, to the Persons who are holders on a subsequent special record date.
The Company shall promptly notify the Trustee 

 

11

 

in writing of the amount of
defaulted interest proposed to be paid on each Note and the date of the
proposed payment.  The Company shall fix
or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than
ten (10) days prior to the related payment date for such defaulted
interest.  At least fifteen (15) days
before the special record date, the Company (or, upon the written request of
the Company, the Trustee in the name and at the expense of the Company) shall
send or cause to be sent to holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.

 

Section 2.4                                      Execution of
Notes

 

The
Notes shall be signed in the name and on behalf of the Company by the facsimile
signature of its President, its Chief Executive Officer, or any of its Vice
Presidents, and attested by the facsimile signature of its Chief Financial
Officer, Treasurer or its Assistant Treasurer, or Secretary or any of its
Assistant Secretaries (which may be printed, engraved or otherwise reproduced
thereon, by facsimile or otherwise). 
Only such Notes as shall bear thereon a certificate of authentication
substantially in the form set forth on the form of Note attached as Exhibit A
hereto, manually executed by the Trustee (or an authenticating agent appointed
by the Trustee as provided by Section 17.10), shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose.  Such certificate by the Trustee (or such
authenticating agent) upon any Note executed by the Company shall be conclusive
evidence that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder thereof is entitled to the benefits of
this Indenture.

 

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

 

Section 2.5                                      Exchange and
Registration of Transfer of Notes; Restrictions on Transfer

 

(a)                                  Note Register.  The
Company shall cause to be kept at the Corporate Trust Office a register (the
register maintained in such office and in any other office or agency of the
Company designated pursuant to Section 5.2 being herein sometimes
collectively referred to as the “Note Register”) in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Notes and of transfers of Notes.  Such register shall be in written form or in
any form capable of being converted into written form within a reasonable
period of time.  The Trustee is hereby
appointed “Note Registrar” for the purpose of registering Notes and transfers
of Notes as herein provided.  The Company
may appoint one or more co-registrars in accordance with Section 5.2.

 

12

 

(b)                                 Transfer and Exchange of Global Notes.  A Global Note may not be transferred as a
whole except by the Depositary to a nominee of the Depositary, by a nominee of
the Depositary to the Depositary or to another nominee of the Depositary, or by
the Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary.  All Global
Notes will be exchanged by the Company for Definitive Notes if (i) the Company
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be exchanged
for Definitive Notes and delivers a written notice to such effect to the
Trustee.  Upon the occurrence of either
of the preceding events in (i) or (ii) above, Definitive Notes shall be issued
in such names as the Depositary shall instruct the Trustee.  Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.6 and 2.7.  Every Note authenticated and delivered in
exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to
this Section 2.5(b) or Section 2.6 or 2.7, shall be authenticated and
delivered in the form of, and shall be, a Global Note.  A Global Note may not be exchanged for
another Note other than as provided in this Section 2.5(b), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.5(c) or (d).

 

(c)                                  Transfer and Exchange of Beneficial Interests in the Global Notes.  The transfer and exchange of beneficial
interests in the Global Notes shall be effected
through the Depositary, in accordance with the provisions of this Indenture and
the Applicable Procedures.  Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.  Transfers of beneficial
interests in the Global Notes also shall require compliance with either subparagraph
(i) or (ii) below, as applicable, as well as one or more of the other following
subparagraphs, as applicable:

 

(i)                                     Transfer of Beneficial Interests in the Same Global Note.  Beneficial interests in any Restricted Global
Note may be transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend.  Beneficial interests in any Unrestricted
Global Note may be transferred to Persons who take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note.  No written orders or instructions shall be
required to be delivered to the Note Registrar to effect the transfers
described in this Section 2.5(c)(i).

 

(ii)                                  All
Other Transfers and Exchanges of Beneficial Interests in Global Notes.  In connection with all transfers and
exchanges of beneficial interests that are not subject to Section 2.5(c)(i) above, the transferor of such beneficial interest must
deliver to the Note Registrar either (A) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in accordance
with the Applicable Procedures directing the Depositary to credit or cause to
be 

 

13

 

credited a beneficial
interest in another Global Note in an amount equal to the beneficial interest
to be transferred or exchanged and (2) instructions given in accordance with
the Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in accordance
with the Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given by the Depositary to the Note Registrar
containing information regarding the Person in whose name such Definitive Note
shall be registered to effect the transfer or exchange referred to in (1)
above.  Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under the Securities
Act, the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.5(l).

 

(iii)                               Transfer of Beneficial Interests to Another
Restricted Global Note.  A
beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements
of Section 2.5(c)(ii) above and the Note
Registrar receives the following:

 

(A)                              if
the transferee will take delivery in the form of a beneficial interest in the
144A Global Note, then the transferor must deliver a certificate in the form of
Exhibit D hereto, including the certifications in item (1) thereof; and

 

(B)                                if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit D hereto, including the
certifications and certificates and Opinion of Counsel required by item (2)
thereof, if applicable.

 

(iv)                              Transfer of Beneficial Interests
in a Restricted Global Note for Beneficial Interests in the Unrestricted Global
Note.  A beneficial interest
in any Restricted Global Note may be transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note if
the transfer complies with the requirements of Section 2.5(c)(ii) above
and

 

(A)                              such
transfer is effected pursuant to a registration statement filed in accordance
with the Registration Rights Agreement; or

 

(B)                                the Note Registrar receives the following:

 

(1)                                  if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a 

 

14

 

certificate
from such holder in the form of Exhibit E hereto, including the
certifications in item (1)(a) thereof; or

 

(2)                                  if
the holder of such beneficial interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who shall take delivery thereof
in the form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit D hereto, including
the certifications in item (3) thereof;

 

and, in each such case
set forth in this subparagraph (B), if the Note Registrar so requests or if the
Applicable Procedures so require, an Opinion of Counsel in form reasonably
acceptable to the Note Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.

 

If any such
transfer is effected pursuant to subparagraph (B) above at a time when an
Unrestricted Global Note has not yet been issued, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.1,
the Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the aggregate principal amount of
beneficial interests transferred pursuant to subparagraph (B) above.

 

Beneficial
interests in an Unrestricted Global Note cannot be exchanged for, or
transferred to Persons who take delivery thereof in the form of, a beneficial
interest in a Restricted Global Note.

 

(d)                                 Transfer or Exchange of Beneficial Interests for Definitive Notes.

 

(i)                                     Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes.  If any
holder of a beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Restricted Definitive Note or to
transfer such beneficial interest to a Person who takes delivery thereof in the
form of a Restricted Definitive Note, then, upon receipt by the Note Registrar
of the following documentation:

 

(A)                              if
the holder of such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of Exhibit E hereto, including
the certifications in item (2)(a) thereof;

 

(B)                                if
such beneficial interest is being transferred to a QIB in accordance with Rule
144A under the Securities Act, a certificate to the effect set forth in Exhibit
D hereto, including the certifications in item (1) thereof;

 

15

 

(C)                                if
such beneficial interest is being transferred pursuant to an exemption from the
registration requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set forth in Exhibit D
hereto, including the certifications in item (2)(a) thereof;

 

(D)                               if
such beneficial interest is being transferred to an Institutional Accredited
Investor in reliance on an exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B) and (C) above, a
certificate to the effect set forth in Exhibit D hereto, including the
certifications, certificates and Opinion of Counsel required by item (2)
thereof, if applicable;

 

(E)                                       if
such beneficial interest is being transferred to the Company or any of its
Subsidiaries, a certificate to the effect set forth in Exhibit D hereto,
including the certifications in item (2)(b) thereof; or

 

(F)                                       if
such beneficial interest is being transferred pursuant to an effective
registration statement under the Securities Act, a certificate to the effect
set forth in Exhibit D hereto, including the certifications in item
(2)(c) thereof;

 

the Trustee shall cause the
aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.5(l), and the Company shall execute and
the Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount.  Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section 2.5(d)
shall be registered in such name or names and in such authorized denomination
or denominations as the holder of such beneficial interest shall instruct the
Note Registrar through instructions from the Depositary and the Participant or
Indirect Participant.  The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are so
registered.  Any Definitive Note issued
in exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.5(d)(i) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer contained
therein.

 

(ii)                                  Beneficial
Interests in Restricted Global Notes to Unrestricted Definitive Notes.  A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:

 

(A)                              such
transfer is effected pursuant to a registration statement filed in accordance
with the Registration Rights Agreement; or

 

16

 

(B)                                the Note Registrar receives the following:

 

(1)                                  if
the holder of such beneficial interest in a Restricted Global Notes proposes to
exchange such beneficial interest for an Unrestricted Definitive Note, a
certificate from such holder in the form of Exhibit E hereto, including
the certifications in item (1)(b) thereof; or

 

(2)                                  if
the holder of such beneficial interest in a Restricted Global Notes proposes to
transfer such beneficial interest to a Person who shall take delivery thereof
in the form of an Unrestricted Definitive Note, a certificate from such holder
in the form of Exhibit D hereto, including the certifications in item
(3) thereof;

 

and, in each such case set forth in this subparagraph
(B), if the Note Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to the Note
Registrar to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.

 

(iii)                               Beneficial
Interests in Unrestricted Global Notes to Unrestricted Definitive Notes.  If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for an
Unrestricted Definitive Note or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note, then, upon satisfaction of the conditions set forth in Section 2.5(c)(ii),
the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.5(l), and the Company
shall execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions an Unrestricted Definitive Note in the
appropriate principal amount.  Any
Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.5(d)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Note Registrar through instructions from the
Depositary and the Participant or Indirect Participant.  The Trustee shall deliver such Unrestricted
Definitive Notes to the Persons in whose names such Notes are so
registered.  Any Unrestricted Definitive
Note issued in exchange for a beneficial interest pursuant to this Section 2.5(d)(iii) shall not bear the Private Placement Legend.

 

(e)                                  Transfer
and Exchange of Definitive Notes for Beneficial Interests.

 

(i)                                     Restricted
Definitive Notes to Beneficial Interests in Restricted Global Notes.  If any holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted Global
Note or to transfer such 

 

17

 

Restricted Definitive
Notes to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the Note Registrar
of the following documentation:

 

(A)                              if
the holder of such Restricted Definitive Note proposes to exchange such Note
for a beneficial interest in a Restricted Global Note, a certificate from such
holder in the form of Exhibit E hereto, including the certifications in
item (2)(b) thereof;

 

(B)                                if
such Restricted Definitive Note is being transferred to a QIB in accordance
with Rule 144A under the Securities Act, a certificate to the effect set forth
in Exhibit D hereto, including the certifications in item (1) thereof;

 

(C)                                if
such Restricted Definitive Note is being transferred pursuant to an exemption
from the registration requirements of the Securities Act in accordance with
Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit
D hereto, including the certifications in item (2)(a) thereof;

 

(D)                               if
such Restricted Definitive Note is being transferred to an Institutional
Accredited Investor in reliance on an exemption from the registration
requirements of the Securities Act other than those listed in subparagraphs (B)
and (C) above, a certificate to the effect set forth in Exhibit D
hereto, including the certifications, certificates and Opinion of Counsel
required by item (2) thereof, if applicable;

 

(E)                                 if
such Restricted Definitive Note is being transferred to the Company or any of
its Subsidiaries, a certificate to the effect set forth in Exhibit D
hereto, including the certifications in item (2)(b) thereof; or

 

(F)                                 if
such Restricted Definitive Note is being transferred pursuant to an effective
registration statement under the Securities Act, a certificate to the effect
set forth in Exhibit D hereto, including the certifications in item
(2)(c) thereof;

 

the Trustee shall cancel the
Restricted Definitive Note, increase or cause to be increased the aggregate
principal amount of, in the case of clause (A) above, the appropriate
Restricted Global Note, in the case of clause (B) above, the 144A Global Note,
and in all other cases, the IAI Global Note.

 

(ii)                                  Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes.  A holder of a
Restricted Definitive Note may exchange such Note for a beneficial interest in
an Unrestricted Global Note or transfer such Restricted Definitive Note to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:

 

18

 

(A)                              such
transfer is effected pursuant to a registration statement filed in accordance
with the Registration Rights Agreement; or

 

(B)                                the Note Registrar receives the following:

 

(1)                                  if
the holder of such Restricted Definitive Notes proposes to exchange such Notes
for a beneficial interest in the Unrestricted Global Note, a certificate from
such holder in the form of Exhibit E hereto, including the
certifications in item (1)(c) thereof; or

 

(2)                                  if
the holder of such Restricted Definitive Notes proposes to transfer such Notes
to a Person who shall take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a certificate from such holder in the
form of Exhibit D hereto, including the certifications in item (3)
thereof;

 

and, in each such case set forth in this subparagraph
(B), if the Note Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to the Note
Registrar to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.

 

Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.5(e)(ii), the
Trustee shall cancel the Restricted Definitive Notes and increase or cause to
be increased the aggregate principal amount of the Unrestricted Global Note.

 

(iii)                               Unrestricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes.  A holder of an
Unrestricted Definitive Note may exchange such Note for a beneficial interest
in an Unrestricted Global Note or transfer such Unrestricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note at any time. 
Upon receipt of a request for such an exchange or transfer, the Trustee
shall cancel the applicable Unrestricted Definitive Note and increase or cause
to be increased the aggregate principal amount of one of the Unrestricted
Global Notes.

 

If any such
exchange or transfer from an Unrestricted Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(A), (ii)(B) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an Authentication Order in accordance with Section 2.1,
the Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Unrestricted
Definitive Notes so transferred.

 

19

 

 

(f)                                    Transfer and Exchange of Definitive Notes for Definitive Notes.  Upon request by a holder of Definitive Notes
and such holder’s compliance with the provisions of this Section 2.5(f), the
Note Registrar shall register the transfer or exchange of Definitive
Notes.  Prior to such registration of
transfer or exchange, the requesting holder shall present or surrender to the
Note Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Note Registrar duly
executed by such holder or by its attorney, duly authorized in writing.  In addition, the requesting holder shall
provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.5(f).

 

(i)                                     Restricted
Definitive Notes to Restricted Definitive Notes.  Any Restricted Definitive Note may be
transferred to and registered in the name of Persons who take delivery thereof
in the form of a Restricted Definitive Note if the Note Registrar receives the
following:

 

(A)                              if
the transfer will be made pursuant to Rule 144A under the Securities Act, then
the transferor must deliver a certificate in the form of Exhibit D
hereto, including the certifications in item (1) thereof; and

 

(B)                                if
the transfer will be made pursuant to any other exemption from the registration
requirements of the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit D hereto, including the
certifications, certificates and Opinion of Counsel required by item (2)
thereof, if applicable.

 

(ii)                                  Restricted Definitive Notes to Unrestricted Definitive Notes.  Any Restricted Definitive Note may be
exchanged by the holder thereof for an Unrestricted Definitive Note or
transferred to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:

 

(A)                              any
such transfer is effected pursuant to a registration statement filed in
accordance with the Registration Rights Agreement; or

 

(B)                                the Note Registrar receives the following:

 

(1)                                  if
the holder of such Restricted Definitive Notes proposes to exchange such Notes
for an Unrestricted Definitive Note, a certificate from such holder in the form
of Exhibit E hereto, including the certifications in item (1)(d) thereof;
or

 

(2)                                  if
the holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit
D hereto, including the certifications in item (3) thereof;

 

20

 

and,
in each such case set forth in this subparagraph (B), if the Note Registrar so
requests, an Opinion of Counsel in form reasonably acceptable to the Company to
the effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance with
the Securities Act.

 

(iii)                               Unrestricted Definitive Notes to Unrestricted Definitive Notes.  A holder of Unrestricted Definitive Notes may
transfer such Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note.  Upon
receipt of a request to register such a transfer, the Note Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the holder thereof.

 

(g)                                 General Provisions Relating to Transfers and Exchanges.

 

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

 

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

 

None of the Company, the
Trustee, the Note Registrar or any co-registrar shall be required to exchange
or register a transfer of (a) any Notes for a period of fifteen (15) days
next preceding the sending of the notice of redemption or (b) any Notes
called for redemption or, if a portion of any Note is selected or called for
redemption, such portion thereof selected or called for redemption or
(c) any Notes surrendered for conversion or, if a portion of any Note is
surrendered for conversion, such portion thereof surrendered for conversion or
(d) any Notes, or a portion of any Note, surrendered for repurchase (and
not withdrawn) in connection with a Repurchase Event or (e) any Notes, or a
portion of any Note, tendered for repurchase (and not withdrawn) pursuant to
Section 16.1.

 

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

 

Prior to due presentment
for the registration of a transfer of any Note, the Trustee, any agent and the
Company may deem and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving payment of 

 

21

 

principal of and interest on such
Notes and for all other purposes, and none of the Trustee, any agent or the
Company shall be affected by notice to the contrary.

 

The Trustee shall
authenticate Global Notes and Definitive Notes in accordance with the
provisions of Section 2.1.

 

(h)                                 Legends.

 

(i)                                     Private Placement Legend on the Notes.  Every Note that bears or is required under
this Section 2.5(h)(i) to bear the legend set forth in this
Section 2.5(h)(i) (together with any Common Stock issued upon conversion
of the Notes and required to bear the legend set forth in
Section 2.5(h)(ii), collectively, the “Restricted Securities”) shall be
subject to the restrictions on transfer set forth in this Section 2.5(h)(i)
(including the legend set forth below), unless such restrictions on transfer
shall be waived by written consent of the Company, and the holder of each such
Restricted Security, by such holder’s acceptance thereof, agrees to be bound by
all such restrictions on transfer.  As
used in Sections 2.5(h)(i) and 2.5(h)(ii), the term “transfer”
encompasses any sale, transfer or other disposition (excluding any pledge
unless or until any foreclosure on such pledge) whatsoever of any Restricted
Security.

 

Subject to Section 5
of the Securities Purchase Agreement, until two (2) years after the original
issuance date of any Note, any certificate evidencing such Note (and all
securities issued in exchange therefor or substitution thereof, other than Common
Stock, if any, issued upon conversion thereof which shall bear the legend set
forth in Section 2.5(h)(ii), if applicable) shall bear a legend in
substantially the following form (unless such Note has been transferred
pursuant to a registration statement that has been declared effective under the
Securities Act (and which continues to be effective at the time of such
transfer), or the Note has been transferred pursuant to the exemption from
registration provided by Rule 144 under the Securities Act, or unless otherwise
agreed by the Company in writing, with notice thereof to the Trustee):

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES
LAWS.  THIS SECURITY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM.  THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS SECURITY.

 

22

 

The Company may, but is
not obligated to, instruct the Trustee to place the
following legend on any Note held by or transferred to an “affiliate” (as
defined in Rule 501(b) of Regulation D under the Securities Act):

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE
DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE
SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A VALID EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT. 
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

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

 

(ii)                                  Private Placement Legend on Stock Certificate.  Until two (2) years
after the original issuance date of any Note, any stock certificate
representing Common Stock issued upon conversion of such Note shall bear a
legend in substantially the following form (unless such Common Stock has been
transferred pursuant to a registration statement that has been declared
effective under the Securities Act (and which continues to be effective at the
time of such transfer), or the Notes from which such Common Stock was converted
were transferred pursuant to a registration statement that has been declared
effective under the Securities Act and which was effective at the time of such
transfer, or the Common Stock has been transferred pursuant to an exemption
from registration provided by Rule 144 under the Securities Act, or unless
otherwise agreed by the Company in writing with written notice thereof to the
Trustee and any transfer agent for the Common Stock):

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM.  THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

23

 

The Company may, but is
not obligated to, instruct the transfer agent for the Company’s Common Stock to
place the following legend on any certificate evidencing shares of Common Stock
held by or transferred to an “affiliate” (as defined in Rule 501(b) of
Regulation D under the Securities Act) of the Company:

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE
DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A VALID
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.  THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

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

 

(iii)                               Global Note Legend. 
Each Global Note shall bear a legend in substantially the following
form:

 

THIS
GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING
THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS
HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT
THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT
TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN
WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.5(b) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.8 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

 

(i)                                     Resale of Notes Purchased by the Company or an Affiliate.  Any Note or Common Stock issued upon the
conversion or exchange of a Note that, prior to the expiration of the holding
period applicable to sales thereof under Rule 144(k) under the Securities
Act (or any successor rule), is purchased or owned by the Company or any
Affiliate thereof may not be resold by the Company or such Affiliate unless
registered 

 

24

 

under the Securities Act or resold pursuant to an
exemption from the registration requirements of the Securities Act in a
transaction that results in such Notes or Common Stock, as the case may be, no
longer being “restricted securities” (as defined under Rule 144).

 

(j)                                     Changes in Law. 
Notwithstanding any provision of Section 2.5 to the contrary, in
the event Rule 144(k) as promulgated under the Securities Act (or any
successor rule) is amended to change the two-year period under Rule 144(k)
(or the corresponding period under any successor rule), from and after receipt
by the Trustee of the Officer’s Certificate and Opinion of Counsel provided for
in this Section 2.5(j), (i) each reference in Section 2.5(h)(i)
to “two (2) years” shall be deemed for all purposes hereof to be references to
such changed period, (ii) each reference in Section 2.5(h)(ii) to “two
(2) years” shall be deemed for all purposes hereof to be references to such
changed period and (iii) all corresponding references in the Notes shall
be deemed for all purposes hereof to be references to such changed period,
provided that such changes shall not become effective if they are otherwise
prohibited by, or would otherwise cause a violation of, the then-applicable
federal securities laws.  As soon as
practicable after the Company has knowledge of the effectiveness of any such
amendment to change the two-year period under Rule 144(k) (or the
corresponding period under any successor rule), unless such changes would
otherwise be prohibited by, or would otherwise cause a violation of, the
then-applicable securities law, the Company shall provide to the Trustee an
Officer’s Certificate and Opinion of Counsel informing the Trustee of the
effectiveness of such amendment and the effectiveness of the foregoing changes
to Sections 2.5(h)(i) and 2.5(h)(ii) and the Notes.  The provisions of this Section 2.5(j)
will not be effective until such time as the Opinion of Counsel and Officer’s
Certificate have been received by the Trustee hereunder.  This Section 2.5(j) shall apply to
successive amendments to Rule 144(k) (or any successor rule) changing the
holding period thereunder.

 

(k)                                  Limitation on Trustee’s Duties.  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 Note 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.

 

(l)                                     Cancellation and/or Adjustment of Global Notes.  At such time as all beneficial interests in a
particular Global Note have been exchanged for Definitive Notes or a particular
Global Note has been redeemed, repurchased or canceled in whole and not in
part, each such Global Note shall be returned to or retained and canceled by
the Trustee in accordance with Section 2.8. 
At any time prior to such cancellation, if any beneficial interest in a
Global Note is exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Note or for
Definitive Notes, the principal amount of Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such Global
Note by the 

 

25

 

Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the Depositary
at the direction of the Trustee to reflect such increase.

 

Section 2.6                                      Mutilated,
Destroyed, Lost or Stolen Notes

 

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

 

The Trustee or such
authenticating agent may authenticate any such substituted Note and deliver the
same upon the receipt of such security or indemnity as the Trustee, the Company
and, if applicable, such authenticating agent may reasonably require.  Upon the issuance of any substituted Note,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses connected therewith.  Once any
substitute Note has been issued pursuant to this Section 2.6, the original Note
being replaced by such substitute Note shall automatically be deemed
canceled.  In case any Note which has
matured or is about to mature or has been called for redemption or is about to
be converted into Common Stock shall become mutilated or be destroyed, lost or
stolen, the Company may, instead of issuing a substitute Note, pay or authorize
the payment of or convert or authorize the conversion of the same (without
surrender thereof except in the case of a mutilated Note), as the case may be,
if the applicant for such payment or conversion shall furnish to the Company,
to the Trustee and, if applicable, to such authenticating agent such security
or indemnity as will be required by them to save each of them harmless for any
loss, liability, cost or expense caused by or connected with such substitution,
and, in case of destruction, loss or theft, evidence reasonably satisfactory to
the Company, the Trustee and, if applicable, any paying agent or conversion
agent of the destruction, loss or theft of such Note and of the ownership
thereof.

 

Every substitute Note
issued pursuant to the provisions of this Section 2.6 by virtue of the
fact that any Note is destroyed, lost or stolen shall constitute an additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be found at any time, and shall be entitled to all the
benefits of (but shall be subject to all the limitations set forth in) this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder.  To the extent permitted by
law, all Notes shall be held and owned upon the express condition that 

 

26

 

the foregoing
provisions are exclusive with respect to the replacement or payment or
conversion of mutilated, destroyed, lost or stolen Notes and shall preclude any
and all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment or
conversion of negotiable instruments or other securities without their
surrender.

 

Section 2.7                                      Temporary
Notes

 

Pending the preparation
of definitive Notes, the Company may execute and the Trustee or an
authenticating agent appointed by the Trustee shall, upon written request of
the Company, authenticate and deliver temporary Notes (printed or
lithographed).  Temporary Notes shall be
issuable in any authorized denomination, and substantially in the form of the
Global Notes or the Definitive Notes, as the case may be, but with such
omissions, insertions and variations as may be appropriate for temporary Notes,
all as may be determined by the Company. 
Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the Definitive Notes or Global Notes. 
Without unreasonable delay the Company will execute and deliver to the
Trustee or such authenticating agent Definitive Notes and Global Notes and
thereupon any or all temporary Notes may be surrendered in exchange for the
applicable replacement Note, at each office or agency maintained by the Company
pursuant to Section 5.2 and the Trustee or such authenticating agent shall
authenticate and deliver in exchange for such temporary Notes an equal
aggregate principal amount of Definitive Notes or Global Notes, as the case may
be.  Such exchange shall be made by the
Company at its own expense and without any charge therefor.  Until so exchanged, the temporary Notes shall
in all respects be entitled to the same benefits and subject to the same
limitations under this Indenture as Definitive Notes or Global Notes, as the
case may be, authenticated and delivered hereunder.

 

Section 2.8                                      Cancellation
of Notes Paid, Etc.

 

All Notes surrendered for
the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note Registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall
be promptly canceled by it, and no Notes shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Indenture.  Upon written instructions of the Company, the
Trustee shall dispose of canceled Notes in accordance with its customary
procedures.  If the Company shall acquire
any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are delivered to the Trustee for cancellation.

 

Section 2.9                                      CUSIP
Numbers

 

The Company in issuing
the Notes shall use “CUSIP” numbers  and the Trustee shall use “CUSIP”
numbers in notices of redemption as a convenience to holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption 

 

27

 

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 III

 

OPTIONAL REDEMPTION OF NOTES

 

Section 3.1                                      Redemption
Price

 

At any time on or after
February 20, 2008, the Company may, at its option, redeem all or any part of
the Notes, upon notice as set forth in Section 3.2, and the Company shall pay
each holder of Notes redeemed a redemption price equal to the principal amount
of such Notes, plus accrued and unpaid interest thereon, if any, to, but
excluding, the date of redemption; provided that, to the extent that the Shelf
Registration Statement is required by the terms of the Registration Rights
Agreement to remain effective as of the date that notice of redemption is
provided in accordance with Section 3.2, the Shelf Registration Statement is
effective and available during the 30 day period prior to the giving of such
notice and at all times from the date of such notice until the redemption date;
provided, further that prior to February 20, 2010, in the event that the Common
Stock is not listed or approved for listing on the NYSE, AMEX or NASDAQ, the
Company may only exercise its redemption right under this Section 3.1 if the
Closing Price during the 30 day period prior to the giving of such notice and
at all times from the date of such notice until the redemption date was less
than 95% of the Conversion Price in effect on each such day.

 

The Company’s right to
require a redemption pursuant to Section 3.1 shall not
be exercised by the Company more than three times.

 

Section 3.2                                      Notice
of Redemption; Selection of Notes

 

In case the Company shall
desire to exercise the right to redeem all or, as the case may be, any part of
the Notes pursuant to Section 3.1, it shall fix a date for redemption, and
it, or at its request (which must be received by the Trustee at least ten (10)
Business Days prior to the date the Trustee is requested to give notice as
described below unless a shorter period is agreed to by the Trustee), the
Trustee in the name of and at the expense of the Company, shall send or cause
to be sent a notice of such redemption at least twenty (20) and not more than
ninety (90) days prior to the date fixed for redemption (such date, the “Redemption
Date”) to the holders of Notes so to be redeemed as a whole or in part at their
last addresses as the same appear on the Note Register (provided that if
the Company shall give such notice, it shall also give such notice, and notice
of the aggregate amount of Notes to be redeemed, to the Trustee).  Such notice shall be irrevocable.  The notice if sent in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice.  In any
case, failure to give such notice or any defect in the notice to the holder of
any Note designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Note.

 

28

 

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

 

On or prior to the
Redemption Date, the Company will deposit with the Trustee or with one or more
paying agents (or, if the Company is acting as its own paying agent, set aside,
segregate and hold in trust as provided in Section 5.4) an amount of money
sufficient to redeem on the redemption date all the Notes (or portions thereof)
so called for redemption (other than those theretofore surrendered for
conversion into Common Stock) at the appropriate redemption price, together
with accrued interest to, but excluding, the Redemption Date; provided
that if such payment is made on the Redemption Date it must be received by the
Trustee or paying agent, as the case may be, by 1:00 p.m. New
York City time, on such date.  If
any Note called for redemption is converted pursuant hereto, any money deposited
with the Trustee or any paying agent or so segregated and held in trust for the
redemption of such Note shall be paid to the Company upon its request, or, if
then held by the Company shall be discharged from such trust.

 

If fewer than all the
Notes are to be redeemed, the Company will give the Trustee written notice in
the form of an Officer’s Certificate not fewer than forty-five (45) days (or
such shorter period of time as may be acceptable to the Trustee) prior to the
Redemption Date as to the aggregate principal amount of Notes to be redeemed,
and the Company, or at its request, the Trustee in the name of and at the
expense of the Company, shall give the holders at least twenty (20) days’
notice in advance of the Redemption Date as to the aggregate principal amount
of Notes to be redeemed.  If fewer than
all the Notes are to be redeemed, the Trustee shall select the Notes or
portions thereof to be redeemed (in principal amounts of One Thousand United
States Dollars ($1,000) or integral multiples thereof), on a pro rata basis or
by lot.  If any Note selected for partial
redemption is converted in part after such selection, the converted portion of
such Note shall be deemed (so far as is possible) to be the portion to be
selected for redemption.  The Notes (or
portions thereof) so selected shall be deemed duly selected for redemption for
all purposes hereof, notwithstanding that any such Note is converted as a whole
or in part before the sending of the notice of redemption.

 

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

 

29

 

Section 3.3                                      Payment
of Notes Called for Redemption

 

If notice of redemption
has been given as above provided, the Notes or portion of Notes with respect to
which such notice has been given shall, unless converted into Common Stock
pursuant to the terms hereof, become due and payable on the date and at the
place or places stated in such notice at the applicable redemption price, and
interest accrued to, but excluding, the Redemption Date, and on and after said
date (unless the Company shall default in the payment of such Notes at the
redemption price and interest accrued to, but excluding, said date) interest on
the Notes or portion of Notes so called for redemption shall cease to accrue
and such Notes shall cease at the close of business on the Redemption Date to
be convertible into Common Stock and, except as provided in Sections 8.5
and 13.4, to be entitled to any benefit or security under this Indenture,
and the holders thereof shall have no right in respect of such Notes except the
right to receive the redemption price thereof and unpaid interest to, but
excluding, the Redemption Date.  On
presentation and surrender of such Notes at a place of payment specified in
said notice, the said Notes or the specified portions thereof to be redeemed
shall be paid and redeemed by the Company at the applicable redemption price
and interest accrued thereon to, but excluding, the Redemption Date; provided
that, if the applicable Redemption Date is an Interest Payment Date, the
semi-annual payment of interest becoming due on such date shall be payable to
the holders of such Notes registered as such on the relevant record date
subject to the terms and provisions of Section 2.3.

 

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

 

Notwithstanding the
foregoing, the Trustee shall not redeem any Notes or send any notice of
optional redemption during the continuance of a default in payment of interest
or premium on the Notes or of any Event of Default of which, in the case of any
Event of Default other than under Section 7.1(a), a Responsible Officer of
the Trustee has actual knowledge.  If any
Note called for redemption shall not be so paid upon surrender thereof for
redemption, the principal and premium, if any, shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate
borne by the Note and such Note shall remain convertible into Common Stock
until the principal and premium, if any, shall have been paid or duly provided
for.

 

Section 3.4                                      Conversion
Arrangement on Call for Redemption

 

In connection with any
redemption of Notes, the Company may arrange for the purchase and conversion of
any Notes not converted prior to the expiration of such conversion right by an
agreement with one or more investment bankers or other purchasers to purchase
such Notes by paying to the Trustee in trust for the Noteholders, on or before
the date fixed for redemption, an amount not less than the applicable
redemption price and interest accrued to the date fixed for redemption, of such
Notes.  Notwithstanding anything to the
contrary contained in this Article III, the obligation of the Company to
pay the redemption price of such Notes and interest accrued to, but excluding,
the date fixed for redemption, shall be deemed to be satisfied and discharged
to the extent such amount is so paid by such purchasers to such
Noteholders.  If such 

 

30

 

an agreement is
entered into, a copy of which, certified as true and correct by the Secretary
or Assistant Secretary of the Company will be filed with the Trustee prior to
the date fixed for redemption, any Notes not duly surrendered for conversion by
the holders thereof may, at the option of the Company, be deemed, to the
fullest extent permitted by law, acquired by such purchasers from such holders
and (notwithstanding anything to the contrary contained in Article XV)
surrendered by such purchasers for conversion, all as of immediately prior to
the close of business on the date fixed for redemption (and the right to
convert any such Notes shall be deemed to have been extended through such
time), subject to payment of the above amount as aforesaid.  At the written direction of the Company, the
Trustee shall hold and dispose of any such amount paid to it in the same manner
as it would monies deposited with it by the Company for the redemption of
Notes.  Without the Trustee’s prior
written consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Notes shall increase or otherwise affect any of
the powers, duties, responsibilities or obligations of the Trustee as set forth
in this Indenture, and the Company agrees to indemnify the Trustee from, and
hold it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Notes between the Company and such purchasers, including the costs and expenses
incurred by the Trustee in the defense of any claim or liability arising out of
or in connection with the exercise or performance of any of its powers, duties,
responsibilities or obligations under this Indenture.

 

ARTICLE IV

 

SUBORDINATION

 

Section 4.1                                      Subordination
to Senior Indebtedness

 

The Company covenants and
agrees, and each holder of a Note, by his or her acceptance thereof, likewise
covenants and agrees, that all Notes shall be issued subject to the provisions
of this Article IV and, to the extent and in the manner hereinafter set forth
in this Article IV, the indebtedness represented by the Notes and the payment
of the principal amount, Conversion Price, and interest thereon, Company
Conversion Provisional Payment, redemption price for Notes called for
redemption in accordance with Section 3.2, the Repurchase Price with respect to
Notes submitted for repurchase in accordance with Section 16.1, liquidated damages,
fees, expenses or any other amounts in respect of each and all of the Notes are
hereby expressly made subordinate and junior and subject in right of payment to
the prior payment in full in cash of all Senior Indebtedness of the Company now
outstanding or hereinafter incurred. “Senior Indebtedness” means the principal
of, and premium, if any, and interest on, reimbursement obligations, fees,
costs and expenses in connection with and other amounts accrued or due on or in
connection with the Senior Facility and (i) all indebtedness of the Company for
monies borrowed, (ii) all obligations of the Company evidenced by any notes,
debentures, bonds or other instruments issued to banks, trust companies,
insurance companies, other financial institutions and other entities that in
the ordinary course of business make loans, (iii) all obligations of the
Company under any interest or currency swap agreements, hedging agreements,
cap, floor and collar agreements, spot and forward contracts and other similar
agreements, (iv) obligations in respect of letters of credit, bank guarantees
and bankers acceptances, (v) obligations of the

 

31

 

Company as lessee
under leases of personal property required to be capitalized under GAAP, (vi) principal
of, and interest on any indebtedness or obligations of others of the kinds
described in (i) through (v) above assumed or guaranteed in any manner by the
Company, and (vii) deferrals, renewals, increases, extensions, refinancings and
refundings of, or amendments, modifications, restatements or supplements to,
any such indebtedness or obligations described in (i) through (v) above, in
each case unless the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that the same is not senior in
right of payment to the Notes.  Senior
Indebtedness includes, with respect to the foregoing, interest accruing on or
after the filing of any petition in any bankruptcy or similar proceeding or for
reorganization relating to the Company, whether or not post-filing interest is
allowed in such proceeding. 
Notwithstanding the foregoing, “Senior Indebtedness” with respect to any
Note shall not include (a) indebtedness of the Company evidenced by the
other Notes, which shall rank equally and ratably with such Note,
(b) indebtedness of the Company to any Subsidiary of the Company other
than indebtedness arising by reason of guarantees by the Company of
indebtedness of any such subsidiary to a Person that is not such a Subsidiary,
(c) any liability for Federal, state, local or other taxes owed or owing
by the Company, (d) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (e) any indebtedness
or obligation of the Company (and any accrued and unpaid interest in respect
thereof) that by its terms is subordinate or junior in right of payment to any
other indebtedness or obligation of the Company or  (f) any obligation with respect to any
shares, interest, rights to purchase, warrants, options, participations or
other equivalents of, or interests in, the equity of the Company or any
Subsidiary or Affiliate, including any preferred stock or other preferred
equity.

 

Section 4.2                                      No
Payment if Default in Senior Indebtedness

 

No
payment on account of principal of, premium, if any, or interest on the Notes
(including, but not limited to, the redemption price for Notes called for
redemption in accordance with Section 3.2, the Repurchase Price with respect to
Notes submitted for repurchase in accordance with Section 16.1, the Conversion
Price, the Company Conversion Provisional Payment and any other payment payable
with respect to the Notes pursuant to the provisions of this Indenture) shall
be made, and no Notes shall be redeemed or purchased directly or indirectly by
the Company (or any of its Subsidiaries), if at the time of such payment or
purchase or immediately after giving effect thereto, (i) a default, whether
matured or unmatured, in the payment of principal, premium, if any, interest,
rent or other obligations in respect of any Senior Indebtedness occurs and is
continuing (a “Payment Default”), unless and until such Payment Default shall
have been cured or waived or shall have ceased to exist or (ii) the Company
shall have received notice (a “Payment Blockage Notice”) from the holder or
holders of Designated Senior Debt or their Representative that there exists
under such Designated Senior Debt a default, whether a Payment Default or
nonpayment Default under the Senior Facility, which shall not have been cured
or waived, permitting the holder or holders thereof to declare such Designated
Senior Debt due and payable, but only for the period (the “Payment Blockage
Period”) commencing on the date of receipt of the Payment Blockage Notice and
ending on the earlier of (a) the date such default shall have been cured or
waived, or (b) the 180th day immediately following the Company’s receipt of
such Payment Blockage Notice.

 

32

 

The
Company shall resume payments on and distributions in respect of the Notes,
including any past scheduled payments of the principal of (and premium, if any)
and interest on such Notes to which the holders of the Notes would have been
entitled but for the provisions of this Section 4.2 in the case of a Payment
Default, on the date upon which such Payment Default is cured or waived or
ceases to exist.  In addition,
notwithstanding clauses (i) and (ii), unless the holders of Designated Senior
Debt shall have accelerated the maturity of such Designated Senior Debt or
there is a Payment Default, the Company shall resume payments on the Note after
the end of each Payment Blockage Period. 
Not more than one Payment Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Debt during such period.

 

Section 4.3                                      Payment
upon Dissolution, Etc.

 

(a)                                  In
the event of any bankruptcy, insolvency, reorganization, receivership,
composition, assignment for benefit of creditors or other similar proceeding
initiated by or against the Company or any dissolution or winding up or total
or partial liquidation or reorganization of the Company (being hereinafter
referred to as a “Proceeding”), each holder of a Note, by his or her acceptance
thereof, agrees that such holder shall, upon request of a holder of Senior
Indebtedness, and at such holder’s own expense take all reasonable actions (including
but not limited to the execution and filing of documents and the giving of
testimony in any Proceeding, whether or not such testimony could have been
compelled by process) necessary to prove the full amount of all their claims in
any Proceeding, and the Noteholders shall not waive any claim in any Proceeding
without the written consent of such holder. 
If the Trustee or the holder of a Note does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
this paragraph (a) of Section 4.3 at least thirty (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 Notes.

 

(b)                                 The
Trustee and the holders of the Notes shall retain the right to vote and
otherwise act with respect to the claims under their Notes (including, without
limitation, the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension); provided that the Trustee or any holder of the
Notes shall not vote with respect to any such plan or take any other action in
any way so as to (i) contest the validity of any Senior Facility or any
collateral therefor or guaranties thereof, (ii) contest the relative rights and
duties of any of the lenders under or the Representatives of the Senior
Facility established in any instruments or agreement creating or evidencing the
Senior Facility with respect to any of such collateral or guaranties, or (iii)
contest the Trustee’s and the holders’ obligations and agreements set forth in
this Section 4.3.

 

(c)                                  Upon
payment or distribution to creditors in a Proceeding of assets of the Company
of any kind or character, whether in cash, property or securities, all
principal and interest due upon any Senior Indebtedness shall first be paid in
full before any 

 

33

 

holders of the Notes shall be entitled to
receive or, if received, to retain any payment or distribution on account of
the Notes, and upon any such Proceeding, any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, to which any holders of the Notes would be entitled except for the
provisions of this Article IV shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by any holders of the Notes who shall have received
such payment or distribution, directly to the holders of the Senior
Indebtedness (pro rata to each such holder on the basis of the respective
amounts of such Senior Indebtedness held by such holder) or their Representatives
to the extent necessary to pay all such Senior Indebtedness in full after
giving effect to any concurrent payment or distribution to or for the holders
of such Senior Indebtedness, before any payment or distribution is made to any
holders of the Notes.

 

Section 4.4                                      Payments
on Notes

 

Subject to Section 4.3,
the Company may make regularly scheduled payments of the principal of, and any
interest or premium on, the Notes, if at the time of payment, and immediately
after giving effect thereto, (i) there exists no Payment Default or Payment
Blockage Period and (ii) the Company is permitted to make payments under
Section 4.3.

 

Section 4.5                                      Certain
Conversions Deemed Payment

 

For the purposes of this
Article IV only (a) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article XV shall not be deemed to
constitute a payment of distribution on account of the principal of or interest
on Notes or on account of the purchase or other acquisition of Notes, and
(b) the payment, issuance or delivery of cash (except in satisfaction of
fractional shares pursuant to Section 15.3), property or securities (other than
junior securities) upon conversion of a Note shall be deemed to constitute
payment on account of the principal of such Note.  For the purposes of this Section 4.5, the
term “junior securities” means (i) shares of any stock of any class of the
Company, or (ii) 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 Notes are so subordinated as provided in this
Article IV.  Nothing contained in this Article
IV or elsewhere in this Indenture or in the Notes is intended to or shall
impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the holders, the right, which is absolute and unconditional,
of the holder of any Note to convert such Note in accordance with Article XV.

 

Section 4.6                                      Subrogation

 

Subject to payment in
full in cash of all Senior Indebtedness, the rights of the holders of the Notes
(together with the holders of any other indebtedness of the Company that is
subordinated in right of payment to payment in full of all Senior Indebtedness,
that is not subordinated in right of payment to the Notes, and that by its
terms grants such right of subrogation to the holders thereof) shall be
subrogated to the rights of the holders of Senior 

 

34

 

Indebtedness to
receive payments or distributions of the assets of the Company made on such
Senior Indebtedness until all principal and interest on the Notes shall be paid
in full; and for purposes of such subrogation, no payments or distributions to
the holders of Senior Indebtedness of any cash, property or securities to which
any holders of the Notes would be entitled except for the subordination
provisions of this Article IV shall, as between the holders of the Notes and
the Company and/or its creditors other than the holders of the Senior
Indebtedness, be deemed to be a payment on account of the Senior Indebtedness.

 

Section 4.7                                      Rights
of Holders Unimpaired

 

The provisions of this
Article IV are and are intended solely for the purposes of defining the
relative rights of the holders of the Notes and the holders of Senior
Indebtedness and nothing in this Article IV shall impair, as between the
Company and any holders of the Notes, the obligation of the Company, which is
unconditional and absolute, to pay to the holders of the Notes the principal
thereof (and premium, if any) and interest thereon, in accordance with the
terms of the Notes.

 

Section 4.8                                      Holders
of Senior Indebtedness

 

These provisions
regarding subordination will constitute a continuing offer to all Persons who,
in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness; such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders are hereby made obligees under such
provisions to the same extent as if they were named therein, and they or any of
them may proceed to enforce such subordination and no amendment or modification
of the provisions contained herein shall diminish the rights of such holders
unless such holders have agreed in writing thereto.  The holders of Senior Indebtedness may, at
any time and from time to time, without the consent of or notice to any of the
Noteholders, without incurring responsibility to the Noteholders and without
impairing or releasing the subordination provisions of this Article IV, (i)
increase the amount of, change the manner, terms or place of payment of, or
renew or alter, any Senior Indebtedness, or otherwise amend, modify, restate or
supplement the same, (ii) sell, exchange or release any collateral mortgaged,
pledged or otherwise securing the Senior Indebtedness, (iii) release any Person
liable in any manner for the Senior Indebtedness and (iv) exercise or refrain
from exercising any rights against the Company or any other Person.

 

Section 4.9                                      Trustee
Not Fiduciary for Holders of Senior Indebtedness

 

The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and
shall not be liable to any such holders if the Trustee shall in good faith
mistakenly pay over or distribute to holders of Notes or to the Company or to
any other person cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article IV or otherwise.  With respect to the holders of Senior
Indebtedness, no implied covenants or obligations with respect to holders of
Senior Indebtedness shall be read into this Indenture against the Trustee.

 

35

 

Section 4.10                                Rights
of Trustee as Holder of Senior Indebtedness; Preservation of Trustee’s Rights

 

The Trustee in its
individual capacity shall be entitled to all the rights set forth in this
Article IV with respect to any Senior Indebtedness which may at any time be
held by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.

 

Nothing in this Article
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 8.6.

 

Section 4.11                                Proceeds
Held in Trust

 

In the event that
notwithstanding the foregoing, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities
(including, without limitation, by way of setoff or otherwise) prohibited by
the provisions of Section 4.2 or Section 4.3 shall be received by the Trustee
of the holders of the Notes before all Senior Indebtedness is paid in full in
cash, 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, as their respective interests may
appear, as calculated by the Company, for application to, or to be held as collateral
for, the payment of any Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness.

 

Section
4.12                                Blockage of Remedies.

 

During any Payment
Default or any Payment Blockage Period, if an Event of Default has occurred
under this Indenture, neither the Trustee nor any of the holders of the Notes
will commence or join with any creditor of the Company or any of its
Subsidiaries in asserting or commencing any proceedings to collect or enforce
its rights hereunder or take any action to foreclose or realize upon the
indebtedness hereunder for a period beginning on the date of such Event of
Default and ending on the first to occur of (i) of the date that is 180 days
following the date of such Event of Default or (ii) the date such Payment
Default is cured, waived or ceases to exist or the date such Payment Blockage
Period ends, as the case may be.

 

Section
4.13                                Prior Notice of Acceleration.

 

The
holders of the Notes agree, solely for the benefit of the lenders under the
Senior Facility, not to declare the unpaid principal amount of any Note to be
due and payable pursuant to Section 7.1 unless the Representative of the Senior
Facility shall have received not less than five (5) Business Days’ prior
written notice from the Company, the Trustee or any holder of the Notes of such
declaration of acceleration.  The
Company, forthwith upon receipt of any such declaration of acceleration, shall
send a copy thereof to the Representative of the Senior Facility.

 

36

 

ARTICLE V

 

PARTICULAR COVENANTS OF THE COMPANY

 

Section 5.1                                      Payment
of Principal, Premium and Interest

 

The Company covenants and
agrees that it will duly and punctually pay or cause to be paid the principal
of and premium, if any, and interest on each of the Notes at the places, at the
respective times and in the manner provided herein and in the Notes.  Liquidated Damages paid pursuant to Section
15.2, if any, shall be paid within ten (10) Business Days of the date from
which such liquidated damages accrued pursuant to Section 15.2.  Liquidated Damages on the Notes paid pursuant
to Section 2(f) of the Registration Rights Agreement, if any, shall be paid at
the times and in the manner provided therein. 
Each installment of interest on the Notes due on any semi-annual
Interest Payment Date may be paid by mailing checks for the interest payable to
or upon the written order of the holders of Notes entitled thereto as they
shall appear on the Note Register, provided that, with respect to any holder of
Notes with an aggregate principal amount equal to or in excess of Five Hundred
Thousand United States Dollars ($500,000), interest on such holder’s Notes
shall be paid by wire transfer in immediately available funds in accordance
with the wire transfer instructions supplied by such holder from time to time
to the Trustee and paying agent (if different from Trustee) at least five (5)
Business Days prior to the applicable record date.

 

Section 5.2                                      Maintenance
of Office or Agency

 

The Company will maintain
in Chicago, Illinois, an office or agency where the Notes may be presented for
registration of transfer or exchange or for presentation for payment or for
conversion, redemption or repurchase and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served, which may
be the Corporate Trust Office of the Trustee. 
The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. 
If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee.

 

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

 

The Company hereby
initially designates the Trustee as paying agent, Note Registrar, Custodian and
conversion agent and the office or agency of the Trustee in Chicago, Illinois(which
initially shall be the Corporate Trust Office of the Trustee), as one such
office or agency of the Company for each of the aforesaid purposes.

 

37

 

So long as the Trustee is
the Note Registrar, the Trustee agrees to send, or cause to be sent, the
notices set forth in Section 8.10(a) and the third paragraph of Section 8.11.

 

Section 5.3                                      Appointments
to Fill Vacancies in Trustee’s Office

 

The Company, whenever
necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in
the manner provided in Section 8.10, a Trustee, so that there shall at all
times be a Trustee hereunder.

 

Section 5.4                                      Provisions
as to Paying Agent

 

(a)                                  If
the Company shall appoint a paying agent other than the Trustee or if the
Trustee shall appoint such a paying agent, it will cause such paying agent to
execute and deliver to the Trustee an instrument in which such agent shall
agree with the Trustee, subject to the provisions of this Section 5.4:

 

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

 

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

 

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

 

The Company shall, on or
before each due date of the principal of, premium, if any, or interest on the
Notes, deposit with the paying agent a sum sufficient to pay such principal,
premium, if any, or interest, and (unless such paying agent is the Trustee) the
Company will promptly notify the Trustee of any failure to take such action,
provided that if such deposit is made on the due date, such deposit must be
received by the paying agent by 10:00 a.m., New York City time, on such
date.

 

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

 

(c)                                  Anything
in this Section 5.4 to the contrary notwithstanding, the Company may, at
any time, for the purpose of obtaining a satisfaction and discharge of this 

 

38

 

Indenture, or for any other reason, pay or cause to be
paid to the Trustee all sums held in trust by the Company or any paying agent
hereunder as required by this Section 5.4, such sums to be held by the
Trustee upon the trusts herein contained and upon such payment by the Company
or any paying agent to the Trustee, the Company or such paying agent shall be
released from all further liability with respect to such sums.

 

(d)                                 Anything
in this Section 5.4 to the contrary notwithstanding, the agreement to hold
sums in trust as provided in this Section 5.4 is subject to
Sections 13.3 and 13.4.

 

Section 5.5                                      Existence

 

Subject to
Article XII, 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 5.6                                      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, make
available to any holder or beneficial holder of Notes or any Common Stock
issued upon conversion thereof, in each case which continue to be Restricted
Securities, in connection with any sale thereof and any prospective purchaser
of Notes or such Common Stock from such holder or beneficial holder, the
information required pursuant to Rule 144A(d)(4) under the Securities Act
upon the request of any holder or beneficial holder of the Notes or such Common
Stock and it will take such further action as any holder or beneficial holder
of such Notes or such Common Stock may reasonably request in connection with
qualification of such sale for exemption from registration under Rule 144A.

 

Section 5.7                                      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 that would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or 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 has been enacted.

 

Section 5.8                                      Compliance
Certificate

 

The Company shall deliver
to the Trustee within one hundred twenty (120) days after the end of each
fiscal year of the Company (beginning with the fiscal year ending on June 30,
2005) an Officer’s Certificate, signed by the principal executive, principal
financial officer or principal accounting officer of the Company, stating
whether or not to the best of such person’s 

 

39

 

knowledge
the signers know of any default or Event of Default that occurred during such
period.   Such Officer’s Certificate
shall describe in reasonable detail the default or Event of Default, if any,
and its status.

 

The Company shall deliver
to the Trustee, as soon as possible and in any event within three (3) Business
Days after the Company becomes aware of the occurrence of any Event of Default
or an event which, with notice or the lapse of time or both, would constitute
an Event of Default, an Officer’s Certificate setting forth the details of such
Event of Default or default and the action which the Company proposes to take
with respect thereto.

 

Section 5.9                                      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..

 

ARTICLE VI

 

NOTEHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

 

Section 6.1                                      Noteholders
Lists

 

The Company covenants and
agrees that it will furnish or cause to be furnished to the Trustee,
semi-annually, not more than fifteen (15) days after each February 1 and
August 1 in each year beginning with August 1, 2005 and at such other
times as the Trustee may request in writing, within thirty (30) days after
receipt by the Company of any such request (or such lesser time as the Trustee
may reasonably request in order to enable it to timely provide any notice to be
provided by it hereunder), a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of Notes as of a date not
more than fifteen (15) days (or such other date as the Trustee may reasonably
request in order to so provide any such notices) prior to the time such
information is furnished, except that no such list need be furnished so long as
the Trustee is acting as Note Registrar.

 

Section 6.2                                      Preservation
and Disclosure of Lists

 

(a)                                  The
Trustee shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the holders of Notes contained in
the most recent list furnished to it as provided in Section 6.1 or
maintained by the Trustee in its capacity as Note Registrar, if so acting.  The Trustee may destroy any list furnished to
it as provided in Section 6.1 upon receipt of a new list so furnished.

 

(b)                                 The
rights of Noteholders to communicate with other holders of Notes with respect
to their rights under this Indenture or under the Notes and the corresponding
rights and duties of the Trustee, shall be as provided by the Trust Indenture
Act.

 

40

 

(c)                                  Every
Noteholder, by receiving and holding the same, agrees with the Company and the
Trustee that neither the Company nor the Trustee nor any agent of either of
them shall be held accountable by reason of any disclosure of information as to
names and addresses of holders of Notes made pursuant to the Trust Indenture
Act.

 

Section 6.3                                      Reports
by Trustee

 

(a)                                  After
this Indenture has been qualified under the Trust Indenture Act, the Trustee
shall transmit to holders of Notes such reports concerning the Trustee and its
actions under this Indenture as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.  If required by Section 313(a) of the
Trust Indenture Act, the Trustee shall, within sixty (60) days after each May
15 following the date of this Indenture deliver to holders a brief report,
dated as of such May 15 which complies with the provisions of such
Section 313(a).

 

(b)                                 A
copy of such report shall, at the time of such transmission to holders of
Notes, be filed by the Trustee with each stock exchange and automated quotation
system upon which the Notes are listed, if any, and with the Company.  The Company will promptly notify the Trustee
as soon as practicable when the Notes are listed on any stock exchange or
automated quotation system and when any such listing is discontinued.

 

Section 6.4                                      Reports
by Company

 

(a)                                  After
this Indenture has been qualified under the Trust Indenture Act, the Company
shall file with the Trustee and the Commission, and transmit to holders of
Notes, such information, documents and other reports and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within fifteen (15) days after the same is so required to
be filed with the Commission.

 

(b)                                 During
any period in which the Company is not subject to Section 13 or 15(d)
under the Exchange Act, the Company will deliver to the Trustee (a) as
soon as available and in any event within ninety (90) days after the end of
each fiscal year of the Company (i) a consolidated balance sheet of the
Company and its Subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, shareholders’ equity and cash flows for
such fiscal year, all reported on by an independent public accountant of
nationally recognized standing and (ii) a report containing a management’s
discussion and analysis of the financial condition and results of operations
and a description of the business and properties of the Company and (b) as
soon as available and in any event within forty-five (45) days after the end of
each of the first three quarters of each fiscal year of the Company (i) an
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such fiscal quarter and the related consolidated statements of
operations, shareholders’ equity and cash flows for such fiscal quarter and
(ii) a report containing a management’s discussion and analysis of the
financial condition and results of operations of the Company for such quarter;
provided that the foregoing statements and reports shall not be required for
any fiscal year or quarter, as 

 

41

 

the
case may be, with respect to which the Company files or expects to file with
the Trustee an annual report or quarterly report, as the case may be, pursuant
to the preceding paragraph of this Section 6.4.  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 Officer’s Certificates).

 

ARTICLE VII

 

DEFAULTS AND REMEDIES

 

Section 7.1                                      Events
of Default

 

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

 

(a)                                  the
Company shall default in the payment when due of (i) any installment of
interest or Liquidated Damages as provided in Section 15.2 upon any of the
Notes, and such default shall continue for ten (10) Business Days after the due
date thereof, (ii) the principal of and premium (including, without limitation
the Company Conversion Provisional Payment), if any, on any of the Notes either
at maturity or in connection with any conversion, redemption, by declaration or
otherwise, or (iii) the Repurchase Price in respect of any Note on the
Repurchase Date therefor in accordance with the provisions of Article XVI; or

 

(b)                                 failure to issue the Additional Shares, if any, to be issued
pursuant to Section 15.13;

 

(c)                                  the
Company’s (1) failure to deliver the required number of shares of Common Stock
within 15 Business Days after the applicable Conversion Date or (2) notice,
written or oral, to any holder, including by way of public announcement or
through any of its agents, at any time, of its intention not to comply with a
request for conversion of any Notes into shares of Common Stock that is
tendered in accordance with the provisions of the Notes;

 

(d)                                 failure
on the part of the Company duly to observe or perform any other of the
covenants on the part of the Company in the Notes or in this Indenture (other
than default in performance of a covenant that is specifically dealt with
elsewhere in this Section) including, without limitation, failure on the part
of the Company to provide a written notice of a Repurchase Event in accordance
with Section 16.2, and the continuance of such failure for a period of
thirty (30) days after the date on which written notice of such failure,
requiring the Company to remedy the same, shall have been given to the Company
by the Trustee, or to the Company and a Responsible Officer of the Trustee by 

 

42

 

the holders of not less than 20% in aggregate
principal amount of the outstanding Notes at the time outstanding determined in
accordance with Section 9.4; or

 

(e)                                  failure
on the part of the Company or any Significant Subsidiary to make any payment at
maturity, including any applicable grace period, in respect of indebtedness of,
or guaranteed or assumed by, the Company or any Significant Subsidiary, whether
such indebtedness now exists or shall hereafter be created, in a principal
amount then outstanding in excess of Five Million United States Dollars
($5,000,000) individually or Ten Million United States Dollars ($10,000,000) in
the aggregate, and the continuance of such failure for a period of fifteen (15)
days after there shall have been given, by registered or certified mail, to the
Company by the Trustee (provided, however, that the Trustee will not be deemed
to have knowledge of such nonpayment unless either (1) a Responsible Officer of
the Trustee has actual knowledge of such nonpayment or (2) the Trustee has
received written notice thereof from the Company, from any holder of the Notes,
from the holder of any such indebtedness or from the trustee under the
agreement or instrument relating to such indebtedness) or to the Company and a
Responsible Officer of the Trustee by the holders of not less than 20% in
aggregate principal amount of the Notes then outstanding, a written notice
specifying such default and requiring the Company to cause such default to be
cured or waived and stating that such notice is a “Notice of Default”
hereunder; or

 

(f)                                    default
on the part of the Company or any Significant Subsidiary with respect to any
Indebtedness of, or guaranteed or assumed by, the Company or any Significant
Subsidiary, which default results in the acceleration of indebtedness in a
principal amount then outstanding in excess of Five Million United States
Dollars ($5,000,000) individually or Ten Million United States Dollars
($10,000,000) in the aggregate, and such indebtedness shall not have been discharged
or such acceleration shall not have been rescinded or annulled for a period of
fifteen (15) days after there shall have been given, by registered or certified
mail, to the Company by the Trustee (provided, however, that the Trustee will
not be deemed to have knowledge of such default unless either (1) a Responsible
Officer of the Trustee has actual knowledge of such default or (2) the Trustee
has received written notice thereof from the Company, from any holder of the
Notes, from the holder of any such Indebtedness or from the trustee under the
agreement or instrument relating to such Indebtedness) or to the Company and a
Responsible Officer of the Trustee by the holders of not less than 20% in
aggregate principal amount of the Notes then outstanding, 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 however, that the fifteen (15) day period referenced above
shall be extended for an additional thirty (30) days if the Company is in good
faith pursuing in good faith a restructuring or refinancing of the accelerated
indebtedness; or

 

(g)                                 one or more final unsatisfied judgments not covered by
insurance aggregating in excess of Ten Million United States Dollars
($10,000,000), at any one time, are 

 

43

 

rendered
against the Company or any Significant Subsidiary and not stayed, bonded or
discharged within 60 days; or

 

(h)                                 the
entry by a court having jurisdiction in the premises of (i) a decree or order
for relief in respect of the Company or any Significant Subsidiary of a
voluntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (ii) a decree or order
adjudging the Company or any Significant Subsidiary as bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Significant
Subsidiary under any applicable federal or state law or (iii) appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or

 

(i)                                     the
commencement by the Company or any Significant Subsidiary of a voluntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, or
the filing by it of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate action by
the Company or any Significant Subsidiary in furtherance of any such action; or

 

(j)                                     any
of the representations or warranties made by the Company herein or in the
Transaction Documents shall be false or misleading in any material respect at
the time made and such condition (to the extent capable of being cured) shall
continue uncured for a period of ten (10) Business Days after there shall have
been given, by registered or certified mail, to the Company and a Responsible
Officer of the Trustee by the holders of not less than 20% in aggregate
principal amount of the Notes then outstanding, a written notice specifying
such default and requiring the Company to cause such default to be cured or
waived and stating that such notice is a “Notice of Default” hereunder; or

 

(k)                                  the
Company shall fail to duly observe or perform any of the covenants on the part
of the Company in the Transaction Documents (other than the Notes and this
Indenture), and such failure shall continue for thirty (30) days after there
shall have been given, by registered or certified mail, to the Company and a
Responsible Officer of the 

 

44

 

Trustee by the holders of not less than 20% in
aggregate principal amount of the Notes then outstanding, a written notice
specifying such default and requiring the Company to cause such default to be
cured or waived and stating that such notice is a “Notice of Default”
hereunder;

 

then, and in each and
every such case (other than an Event of Default specified in
Section 7.1(e) or (f) with respect to the Company), unless the
principal of all of the Notes shall have already become due and payable, and
unless the Event of Default shall have been waived in writing in accordance
with the provisions of Section 7.7, either the Trustee or the holders of not
less than 20% in aggregate principal amount of the Notes then outstanding
hereunder determined in accordance with Section 9.4, by notice in writing
to the Company (and to the Trustee if given by Noteholders), may declare the
principal of and premium, if any, on all the Notes and the interest accrued
thereon (including Liquidated Damages to the extent accrued and unpaid) to be
due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this Indenture or
in the Notes contained to the contrary notwithstanding.  If an Event of Default specified in
Section 7.1(e) or (f) occurs and is continuing with respect to
the Company, the principal of all the Notes and the interest accrued thereon
(including Liquidated Damages to the extent accrued and unpaid) shall be
immediately due and payable.  In addition
to the foregoing, upon an Event of Default, the rate of interest on the Notes
shall, be increased by five percent (5%) per annum (i.e., from 7% to 12% per
annum), or if less, increased to the maximum interest rate then permitted by
applicable law.  Any such interest which
is not paid when due shall, to the maximum extent permitted by law, accrue
interest until paid at the rate from time to time applicable to the interest on
the Notes.  Notwithstanding the foregoing
if, at any time after the principal of the Notes shall have been so declared
due and payable, and before any judgment or decree for the payment of the
monies due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all Notes and the principal of and
premium, if any, on any and all Notes which shall have become due otherwise
than by acceleration (with interest on overdue installments of interest (to the
extent that payment of such interest is enforceable under applicable law) and
on such principal and premium, if any, at the rate borne by the Notes, to the
date of such payment or deposit) and amounts due to the Trustee pursuant to
Section 8.6, and if any and all defaults under this Indenture, other than
the nonpayment of principal of and premium, if any, and accrued interest on
Notes which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 7.7, then and in every such case the holders of
a majority in aggregate principal amount of the Notes then outstanding, by
written notice to the Company and to the Trustee, may waive all defaults or
Events of Default and rescind and annul such acceleration and its consequences;
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or Event of Default, or shall impair any right
consequent thereon.  The Company shall
notify the Responsible Officer of the Trustee, within three (3) Business
Days of becoming aware thereof, of any default or Event of Default and shall
deliver to the Trustee a statement specifying such default or Event of Default
and the action the Company has taken, is taking or proposes to take with
respect thereto.

 

In case the Trustee shall
have proceeded to enforce any right under this Indenture and such proceedings
shall have been discontinued or abandoned because of such waiver or 

 

45

 

rescission and
annulment or for any other reason or shall have been determined adversely to
the Trustee, then and in every such case the Company, the holders of Notes, and
the Trustee shall be restored respectively to their several positions and
rights hereunder, and all rights, remedies and powers of the Company, the
holders of Notes, and the Trustee shall continue as though no such proceeding
had been instituted.

 

Section 7.2                                      Payments
of Notes on Default; Suit Therefor

 

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

 

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

 

In case there shall be
pending proceedings for the bankruptcy or for the reorganization of the Company
or any other obligor on the Notes under Title 11 of the United States
Code, or any other applicable law, or in case a receiver, assignee or trustee
in bankruptcy or reorganization, liquidator, sequestrator or similar official
shall have been appointed for or taken possession of the Company or such other
obligor, the property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 7.2, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal, premium, if any, and interest (including Liquidated
Damages, if any) owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or
documents and to take such other actions as it may 

 

46

 

deem necessary or
advisable in order to have the claims of the Trustee and of the Noteholders
allowed in such judicial proceedings relative to the Company or any other
obligor on the Notes, its or their creditors, or its or their property, and to
collect and receive any monies or other property payable or deliverable on any
such claims, and to distribute the same after the deduction of any amounts due
the Trustee under Section 8.6; and any receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, custodian or similar official is
hereby authorized by each of the Noteholders to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to the Noteholders, to pay to the Trustee any amount due it
for reasonable compensation, expenses, advances and disbursements, including
agents and counsel fees incurred by it up to the date of such
distribution.  To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.

 

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

 

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

 

Section 7.3                                      Application
of Monies Collected by Trustee

 

Any monies collected by
the Trustee pursuant to this Article VII shall be applied in the following
order, at the date or dates fixed by the Trustee for the distribution of such
monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:

 

First:                     To
the payment of all amounts due the Trustee under Section 8.6;

 

Second:     To
the payment of all Senior Indebtedness to the extent required by
Article IV;

 

Third:                In
case the principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on the Notes in default in the order of the
maturity of the installments of such interest, with interest (to the extent
that such interest 

 

47

 

has been collected by the
Trustee) upon the overdue installments of interest at the rate borne by the
Notes, such payments to be made ratably to the Persons entitled thereto;

 

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

 

Fifth:                    To
the payment of the remainder, if any, to the Company.

 

Section 7.4                                      Proceedings
by Noteholder

 

Subject to the last two
paragraphs of this Section 7.4, no holder of any Note shall have any right by
virtue of or by availing of any provision of this Indenture to institute any
suit, action or proceeding in equity or at law upon or under or with respect to
this Indenture, or for the appointment of a receiver, trustee, liquidator,
custodian or other similar official, or for any other remedy hereunder, unless
such holder previously shall have given to the Trustee written notice of an
Event of Default and of the continuance thereof, as hereinbefore provided, and
unless also the holders of not less than 20% in aggregate principal amount of
the Notes then outstanding shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such indemnity as may be reasonably
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of Notes shall
have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Notes (except as otherwise provided herein).  For the protection and enforcement of this
Section 7.4, each and every Noteholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.

 

Notwithstanding any other
provision of this Indenture and any provision of any Note, the right of any
holder of any Note to receive payment of the principal of and premium, if any,
and interest (including Liquidated Damages to the extent accrued but unpaid) on
such Note, on or after the respective due dates expressed in such Note, or to
institute suit for the enforcement of 

 

48

 

any
such payment on or after such respective dates against the Company shall not be
impaired or affected without the consent of such holder.

 

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

 

Section 7.5                                      Proceedings
by Trustee

 

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

 

Section 7.6                                      Remedies
Cumulative and Continuing

 

Except as provided in the
last paragraph of Section 2.6, all powers and remedies given by this
Article VII to the Trustee or to the Noteholders shall, to the extent
permitted by law, be deemed cumulative and not exclusive of any thereof or of
any other powers and remedies available to the Trustee or the holders of the
Notes, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture, and no
delay or omission of the Trustee or of any holder of any of the Notes to
exercise any right or power accruing upon any default or Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or any acquiescence
therein; and, subject to the provisions of Section 7.4, every power and
remedy given by this Article VII or by law to the Trustee or to the
Noteholders may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Noteholders.

 

Section 7.7                                      Direction
of Proceedings and Waiver of Defaults by Majority of Noteholders

 

The holders of a majority
in aggregate principal amount of the Notes at the time outstanding determined
in accordance with Section 9.4 shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee; provided,
however, that (a) such direction shall not be in conflict with any
rule of law or with this Indenture, and (b) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.  The holders of not less than
a majority in aggregate principal amount of the Notes at the time outstanding
determined in accordance with Section 9.4 may on behalf of the holders of
all of the Notes waive any past default or Event of Default hereunder and its
consequences except (i) a default in the payment of interest or premium, if
any, on, or the principal of, the Notes when due, 

 

49

 

(ii) a
failure by the Company to convert any Notes into Common Stock or (iii) a
default in respect of a covenant or provisions hereof which under Article XI
cannot be modified or amended without the consent of all affected holders of
Notes then outstanding.  Upon any such
waiver the Company, the Trustee and the holders of the Notes shall be restored
to their former positions and rights hereunder; said default or Event of
Default shall for all purposes of the Notes and this Indenture be deemed to
have been cured and to be not continuing; but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.

 

Section 7.8                                      Notice
of Defaults

 

The Trustee shall, within
ninety (90) days after the Trustee obtains knowledge of the occurrence of a
default, send to all Noteholders, as the names and addresses of such holders
appear upon the Note Register, notice of all defaults actually known to a
Responsible Officer, unless such defaults shall have been cured or waived
before the giving of such notice; and provided that, except in the case of
default in the payment of the principal of, or premium, if any, or interest
(including Liquidated Damages to the extent accrued but unpaid) on any of the
Notes, including without limiting the generality of the foregoing any default
in the payment of any Repurchase Price or in the payment of any amount due in
connection with any redemption of Notes, then in any such event the Trustee
shall be protected in withholding such notice if and so long as a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the
Noteholders.

 

Section 7.9                                      Undertaking
to Pay Costs

 

All parties to this
Indenture agree, and each holder of any Note by his acceptance thereof shall be
deemed to have agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys’ fees and expenses, against any party litigant
in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided that the provisions of
this Section 7.9 shall not apply to any suit instituted by the Trustee, to
any suit instituted by any Noteholder, or group of Noteholders, holding in the
aggregate more than 20% in principal amount of the Notes at the time
outstanding determined in accordance with Section 9.4, or to any suit
instituted by any Noteholder for the enforcement of the payment of the
principal of or premium, if any, or interest (including Liquidated Damages to
the extent accrued but unpaid) on any Note (including, but not limited to, the
redemption price or Repurchase Price with respect to the Notes being redeemed
or repurchased as provided in this Indenture) on or after the due date
expressed in such Note or to any suit for the enforcement of the right to
convert any Note in accordance with the provisions of Article XV.

 

Section 7.10                                Delay
or Omission Not Waiver

 

No delay or omission of
the Trustee or of any holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a 

 

50

 

waiver
of any such Event of Default or any acquiescence therein.  Every right and remedy given by this
Article VII or by law to the Trustee or to the holders of Notes may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the holders of Notes, as the case may be.

 

ARTICLE VIII

 

CONCERNING THE TRUSTEE

 

Section 8.1                                      Duties
and Responsibilities of Trustee

 

The Trustee, prior to the
occurrence of an Event of Default and after the curing or waiver of all Events
of Default that may have occurred, undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and the Trust
Indenture Act.  In case an Event of
Default has occurred (which has not been cured or waived) the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person’s own
affairs.

 

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

 

(a)                                  prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default that may have occurred:

 

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

 

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

 

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

 

51

 

(c)                                  the
Trustee shall not be liable to any Noteholder with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
the holders of not less than a majority in principal amount of the Notes at the
time outstanding determined as provided in Section 9.4 relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture; and

 

(d)                                 whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or affording
protection to, the Trustee shall be subject to the provisions of this Section.

 

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

 

Section 8.2                                      Reliance
on Documents, Opinions, Etc.

 

Except as otherwise
provided in Section 8.1:

 

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

 

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

 

(c)                                  the
Trustee may consult with counsel of its selection, and any advice of such
counsel or Opinion of Counsel as to matters of law shall be full and complete
authorization and protection in respect of any action taken or omitted by it
hereunder in good faith and in accordance with such advice or Opinion of
Counsel if such counsel was selected with due care;

 

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

 

(e)                                  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 or other paper or
document, but the 

 

52

 

Trustee, in its reasonable 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; provided, however,
that if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require indemnity reasonably satisfactory to the Trustee from the
Noteholders against such expenses or liability as a condition to so proceeding;
the reasonable expenses of every such examination shall be paid by the Company
or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the
Company upon demand;

 

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

 

(g)                                 the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably believed by
it to be authorized or within the discretion or rights or powers conferred upon
it by this Indenture;

 

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

 

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

 

In no event shall the
Trustee be liable for any consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Trustee has been
advised of the likelihood of such loss or damage and regardless of the form of
action.

 

Section 8.3                                      No
Responsibility for Recitals, Etc.

 

The recitals contained
herein and in the Notes (except in the Trustee’s certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no 

 

53

 

responsibility
for the correctness of the same.  The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes.  The Trustee
shall not be accountable for the use or application by the Company of any Notes
or the proceeds of any Notes authenticated and delivered by the Trustee in
conformity with the provisions of this Indenture.

 

Section 8.4                                      Trustee,
Paying Agents, Conversion Agents or Note Registrar May Own Notes

 

The Trustee, any paying
agent, any conversion agent or Note Registrar, in its individual or any other
capacity, may become the owner or pledgee of Notes with the same rights it
would have if it were not Trustee, paying agent, conversion agent or Note
Registrar.

 

Section 8.5                                      Monies
to be Held in Trust

 

Subject to the provisions
of Section 13.4, all monies received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received.  Money held by the Trustee
in trust hereunder need not be segregated from other funds except to the extent
required by law.  The Trustee shall be
under no liability for interest on any money received by it hereunder except as
may be agreed in writing from time to time by the Company and the Trustee.

 

Section 8.6                                      Compensation
and Expenses of Trustee

 

The Company covenants and
agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, such compensation as the Company and the Trustee shall from time
to time agree in writing for all services rendered by it hereunder in any
capacity (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents and
counsel and of all Persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence, willful
misconduct or bad faith.  The Company
also covenants to indemnify the Trustee or any predecessor Trustee in any
capacity under this Indenture and its agents and any authenticating agent for,
and to hold them harmless against, any and all loss, damages, claims, liability
or expense, including taxes (other than those based upon, measured by or
determined by the income of the Trustee), incurred without negligence, willful
misconduct or bad faith on the part of the Trustee or such agent or
authenticating agent, as the case may be, and arising out of or in connection
with the acceptance or administration of this trust or in any other capacity
hereunder, including the costs and expenses of defending themselves against any
claim (whether asserted by the Company, a holder or any other Person) of
liability in the premises.  The
obligations of the Company under this Section 8.6 to compensate or
indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien upon all property and
funds held or collected by the Trustee as such, except, subject to the effect
of Sections 4.3 and 7.5, funds held in trust herewith for the benefit
of the holders of particular Notes prior to the date of the accrual of such
unpaid compensation or indemnifiable claim. 
The obligation of the Company 

 

54

 

under
this Section 8.6 shall survive the satisfaction and discharge of this Indenture
and the resignation or removal of the Trustee. 
The indemnification provided in this Section 8.6 shall extend to
the officers, directors, agents and employees of the Trustee.

 

When the Trustee and its
agents and any authenticating agent incur expenses or render services after an
Event of Default specified in Section 7.1(e) or (f) occurs, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any bankruptcy, insolvency or similar laws.

 

Section 8.7                                      Officer’s
Certificate as Evidence

 

Except as otherwise
provided in Section 8.1, whenever in the administration of the provisions
of this Indenture the Trustee shall deem it necessary or desirable that a
matter be proved or established prior to taking or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence, willful misconduct
or bad faith on the part of the Trustee, be deemed to be conclusively proved
and established by an Officer’s Certificate delivered to the Trustee, and such
Officer’s Certificate, in the absence of negligence, willful misconduct or bad
faith on the part of the Trustee, shall be full warrant to the Trustee for any
action taken or omitted by it under the provisions of this Indenture upon the
faith thereof.

 

Section 8.8                                      Conflicting
Interests of Trustee

 

If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.

 

Section 8.9                                      Eligibility
of Trustee

 

There shall at all times
be a Trustee hereunder that shall be a Person that is eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and surplus
(together with its corporate parent) of at least Fifty Million United States
Dollars ($50,000,000).  If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of any supervising or examining authority, then for the purposes
of this Section 8.9, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published.  If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 8.9, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article VIII.

 

Section 8.10                                Resignation
or Removal of Trustee

 

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

 

55

 

trustee.  If no successor trustee shall have been so
appointed and have accepted appointment sixty (60) days after the sending of
such notice of resignation to the Noteholders, the resigning Trustee may, at
the expense of the Company, petition any court of competent jurisdiction for
the appointment of a successor trustee, or any Noteholder who has been a bona
fide holder of a Note or Notes for at least six months may, subject to the
provisions of Section 7.9, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor
trustee.  Such court may thereupon, after
such notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.

 

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

 

(1)                                  the
Trustee shall fail to comply with Section 8.8 within a reasonable time
after written request therefor by the Company or by any Noteholder who has been
a bona fide holder of a Note or Notes for at least six months, or

 

(2)                                  the
Trustee shall cease to be eligible in accordance with the provisions of
Section 8.9 and shall fail to resign after written request therefor by the
Company or by any such Noteholder, or

 

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

 

then, in any such case,
the Company may by a Board Resolution remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.9, any Noteholder who has been a bona fide holder
of a Note or Notes for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee.  Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.

 

(c)                                  The
holders of a majority in aggregate principal amount of the Notes at the time
outstanding may at any time remove the Trustee and nominate a successor trustee
which shall be deemed appointed as successor trustee unless within ten (10)
days after notice to the Company of such nomination the Company objects thereto,
in which case the Trustee so removed or any Noteholder, upon the terms and
conditions and otherwise as in Section 8.10(a) provided, may, at the
expense of the Company, petition any court of competent jurisdiction for an
appointment of a successor trustee.

 

(d)                                 Any
resignation or removal of the Trustee and appointment of a successor trustee
pursuant to any of the provisions of this Section 8.10 shall become
effective upon acceptance of appointment by the successor trustee as provided
in Section 8.11.

 

56

 

(e)                                  If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within thirty (30) days
after the giving of such notice of removal, the Trustee being removed may
petition, at the expense of the Company, any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the Securities of
such series.

 

Section 8.11                                Acceptance
by Successor Trustee

 

Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect
as if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of
Section 8.6, execute and deliver an instrument transferring to such
successor trustee all the rights and powers of the trustee so ceasing to
act.  Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all
such rights and powers.  Any trustee
ceasing to act shall, nevertheless, retain a lien upon all property and funds
held or collected by such trustee as such, except for funds held in trust for
the benefit of holders of particular Notes, to secure any amounts then due it
pursuant to the provisions of Section 8.6.

 

No successor trustee
shall accept appointment as provided in this Section 8.11 unless at the
time of such acceptance such successor trustee shall be qualified under the
provisions of Section 8.8 and be eligible under the provisions of
Section 8.9.

 

Upon acceptance of
appointment by a successor trustee as provided in this Section 8.11, the
Company shall send or cause to be sent notice of the succession of such trustee
hereunder to the holders of Notes at their addresses as they shall appear on
the Note Register.  If the Company fails
to send such notice within ten (10) days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be sent at
the expense of the Company.

 

Section 8.12                                Succession
by Merger, Etc.

 

Any corporation or other
entity into which the Trustee may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
other entity succeeding to all or substantially all of the corporate trust
business of the Trustee (including the trust created by this Indenture), shall
be the successor to the Trustee hereunder without the execution or filing of
any paper or any further act on the part of any of the parties hereto, provided
that in the case of any corporation succeeding to all or substantially all of
the corporate trust business of the Trustee such corporation shall be qualified
under the provisions of Section 8.8 and eligible under the provisions of
Section 8.9.

 

57

 

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

 

Section 8.13                                Limitation
on Rights of Trustee as Creditor

 

If
and when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Notes), the Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of the claims against the Company
(or any such other obligor).

 

ARTICLE IX

 

CONCERNING THE NOTEHOLDERS

 

Section 9.1                                      Action
by Noteholders

 

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

 

Section 9.2                                      Proof
of Execution by Noteholders

 

Subject to the provisions
of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee.  The holding of Notes shall be proved by the
Note Register or 

 

58

 

by
a certificate of the Note Registrar.  The
record of any Noteholders’ meeting shall be proved in the manner provided in
Section 10.6.

 

Section 9.3                                      Who
Are Deemed Absolute Owners

 

The Company, the Trustee,
any authenticating agent, any paying agent, any conversion agent and any Note
Registrar may deem the Person in whose name such Note shall be registered upon
the Note Register to be, and may treat him as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal of, premium, if any, and interest (including
Liquidated Damages to the extent accrued but unpaid) on such Note, for
conversion of such Note and for all other purposes; and neither the Company nor
the Trustee nor any authenticating agent nor any paying agent nor any
conversion agent nor any Note Registrar shall be affected by any notice to the
contrary.  All such payments so made to
any holder for the time being, or upon his order, shall be valid, and, to the
extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for monies payable upon any such Note.

 

Section 9.4                                      Company-Owned
Notes Disregarded

 

In determining whether
the holders of the requisite aggregate principal amount of Notes have concurred
in any direction, consent, waiver or other action under this Indenture, Notes
that are owned by the Company or any other obligor on the Notes or by any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Notes
shall be disregarded and deemed not to be outstanding for the purpose of any
such determination; provided that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction,
consent, waiver or other action only Notes which a Responsible Officer actually
knows are so owned shall be so disregarded. 
Notes so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section 9.4 if the pledgee shall
establish to the satisfaction of the Trustee the pledgee’s right to vote such
Notes and that the pledgee is not the Company, any other obligor on the Notes
or a Person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Company or any such other obligor.  In the case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.  Upon request
of the Trustee, the Company shall furnish to the Trustee promptly an Officer’s
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described Persons;
and, subject to Section 8.1, the Trustee shall be entitled to accept such
Officer’s Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Notes listed therein are not outstanding for the purpose
of any such determination.

 

Section 9.5                                      Revocation
of Consents; Future Holders Bound

 

At any time prior to (but
not after) the evidencing to the Trustee, as provided in Section 9.1, of
the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have 

 

59

 

consented to such
action may, by filing written notice with the Trustee at its Corporate Trust
Office and upon proof of holding as provided in Section 9.2, revoke such
action so far as concerns such Note. 
Except as aforesaid, any such action taken by the holder of any Note
shall be conclusive and binding upon such holder and upon all future holders
and owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.

 

ARTICLE X

 

NOTEHOLDERS’ MEETINGS

 

Section 10.1                                Purpose
of Meetings

 

A meeting of Noteholders
may be called at any time and from time to time pursuant to the provisions of
this Article X for any of the following purposes:

 

(1)                                  to
give any notice to the Company or to the Trustee or to give any directions to
the Trustee permitted under this Indenture, or to consent to the waiving of any
default or Event of Default hereunder and its consequences, or to take any
other action authorized to be taken by Noteholders pursuant to any of the
provisions of Article VII;

 

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

 

(3)                                  to
consent to the execution of an indenture or indentures supplemental hereto
pursuant to the provisions of Section 11.2;

 

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

 

(5)                                  to take any other action authorized by this Indenture or
under applicable law.

 

Section 10.2                                Call
of Meetings by Trustee

 

The Trustee may at any
time call a meeting of Noteholders to take any action specified in
Section 10.1, to be held at such time and at such place as the Trustee
shall determine.  Notice of every meeting
of the Noteholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting and the
establishment of any record date pursuant to Section 9.1, shall be sent to
holders of Notes at their addresses as they shall appear on the Note
Register.  Such notice shall also be sent
to the Company.  Such notices shall be
sent not less than twenty (20) nor more than ninety (90) days prior to the date
fixed for the meeting.

 

Any meeting of
Noteholders shall be valid without notice if the holders of all Notes then
outstanding are present in person or by proxy or if notice is waived before or
after the meeting by 

 

60

 

the
holders of all Notes outstanding, and if the Company and the Trustee are either
present by duly authorized representatives or have, before or after the
meeting, waived notice.

 

Section 10.3                                Call
of Meetings by Company or Noteholders

 

In case at any time the
Company, pursuant to a resolution of its Board of Directors, or the holders of
at least 10% in aggregate principal amount of the Notes then outstanding, shall
have requested the Trustee to call a meeting of Noteholders, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have sent the notice of such meeting within
twenty (20) days after receipt of such request, then the Company or such
Noteholders may determine the time and the place for such meeting and may call
such meeting to take any action authorized in Section 10.1, by sending
notice thereof as provided in Section 10.2.

 

Section 10.4                                Qualifications
for Voting

 

To be entitled to vote at
any meeting of Noteholders a Person shall (a) be a holder of one or more
Notes on the record date pertaining to such meeting or (b) be a Person
appointed by an instrument in writing as proxy by a holder of one or more
Notes.  The only Persons who shall be
entitled to be present or to speak at any meeting of Noteholders shall be the
Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

 

Section 10.5                                Regulations

 

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

 

The Trustee shall, by an
instrument in writing, appoint a temporary chairman of the meeting, unless the
meeting shall have been called by the Company or by Noteholders as provided in
Section 10.3, in which case the Company or the Noteholders calling the
meeting, as the case may be, shall in like manner appoint a temporary
chairman.  A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the holders of a
majority in principal amount of the Notes represented at the meeting and
entitled to vote at the meeting.

 

Subject to the provisions
of Section 9.4, at any meeting each Noteholder or proxyholder shall be
entitled to one vote for each One Thousand United States Dollars ($1,000) principal
amount of Notes held or represented by such Noteholder; provided, however,
that no vote shall be cast or counted at any meeting in respect of any Note
challenged as not outstanding and ruled by the chairman of the meeting to be
not outstanding.  The chairman of the
meeting shall have no right to vote other than by virtue of Notes held by him
or instruments in writing as aforesaid duly designating him as the proxy to
vote on behalf of other Noteholders.  Any
meeting of Noteholders duly called pursuant to the provisions of
Section 10.2 or 10.3 may be adjourned 

 

61

 

from
time to time by the holders of a majority of the aggregate principal amount of
Notes represented at the meeting, whether or not constituting a quorum, and the
meeting may be held as so adjourned without further notice.

 

Section 10.6                                Voting

 

The vote upon any
resolution submitted to any meeting of Noteholders shall be by written ballot
on which shall be subscribed the signatures of the holders of Notes or of their
representatives by proxy and the principal amount of the Notes held or
represented by them.  The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. 
A record in duplicate of the proceedings of each meeting of Noteholders
shall be prepared by the secretary of the meeting and there shall be attached
to said record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more persons having knowledge of
the facts setting forth a copy of the notice of the meeting and showing that
said notice was sent as provided in Section 10.2.  The record shall show the principal amount of
the Notes voting in favor of or against any resolution.  The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one
of the duplicates shall be delivered to the Company and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting.

 

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

 

Section 10.7                                No
Delay of Rights by Meeting

 

Nothing contained in this
Article X shall be deemed or construed to authorize or permit, by reason
of any call of a meeting of Noteholders or any rights expressly or implicitly
conferred hereunder to make such call, any hindrance or delay in the exercise
of any right or rights conferred upon or reserved to the Trustee or to the
Noteholders under any of the provisions of this Indenture or of the Notes.

 

ARTICLE XI

 

AMENDMENTS; SUPPLEMENTAL INDENTURES

 

Section 11.1                                Amendments;
Supplemental Indentures without Consent of Noteholders

 

The Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from time to time and at any time amend or supplement this Indenture or the
Notes without notice to or the consent of any Holder for one or more of the
following purposes:

 

(a)                                  to
make provision with respect to the conversion rights of the holders of Notes
pursuant to the requirements of Section 15.6;

 

62

 

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

 

(c)                                  to
evidence the succession of another corporation, limited liability company,
partnership or trust to the Company, or successive successions, and the
assumption by the successor corporation, limited liability company, partnership
or trust of the covenants, agreements and obligations of the Company pursuant to
Article XII;

 

(d)                                 reduce
the Conversion Price with respect to all outstanding Notes; provided, however, that such reduction in
the Conversion Price shall be in accordance with the terms of this Indenture
and shall not adversely affect the interests of the holders of Notes (including
after taking into account tax and other consequences of such reduction);

 

(e)                                  to
add to the covenants of the Company such further covenants, restrictions or
conditions as the Board of Directors and the Trustee shall consider to be for
the benefit of the holders of Notes, including without limitation to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however,
that in respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default
or may limit the remedies available to the Trustee upon such default;

 

(f)                                    add additional Events of Default;

 

(g)                                 convey,
transfer, assign, mortgage or pledge to the Trustee as security for the
Securities any property or assets;

 

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

 

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

 

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

 

63

 

(k)                                  to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualifications of
this Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted.

 

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

 

Any amendment or
supplemental indenture authorized by the provisions of this Section 11.1
may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.

 

Section 11.2                                Amendments;
Supplemental Indentures with Consent of Noteholders

 

With the consent
(evidenced as provided in Article IX) of the holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding
(determined in accordance with Section 9.4), the Company, when authorized
by the resolutions of the Board of Directors, and the Trustee may from time to
time and at any time amend or supplement, the Notes or this Indenture for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or any supplemental indenture or of
modifying in any manner the rights of the holders of the Notes; provided,
however, that no such amendment or supplemental indenture shall
(i) extend the fixed maturity of any Note, or reduce the rate or extend
the time of payment of interest thereon, or reduce the principal amount thereof
or premium, if any, thereon, or reduce any amount payable on redemption or
repurchase or conversion thereof, impair, or change in any respect adverse to
the holder of Notes, the obligation of the Company to repurchase any Note at
the option of the holder upon the happening of a Repurchase Event or any
Repurchase Date, or impair or adversely affect the right of any Noteholder to
institute suit for the payment thereof, or change the currency in which the
Notes are payable, or impair or change in any respect adverse to the
Noteholders the right to convert the Notes into Common Stock subject to the
terms set forth herein, including Section 15.6, without the consent of the
holder of each Note so affected, or (ii) reduce the aforesaid percentage
of Notes, the holders of which are required to consent to any such supplemental
indenture, or modify this paragraph, without the consent of the holders of all
Notes then outstanding; provided, further, however, that
any amendment or supplemental indenture that disproportionately affects the
rights of a Noteholder or a class of Noteholder shall require the prior consent
of such Noteholder or the prior consent of Noteholders holding a majority of
the principal amount of Notes then held by such class, as applicable.

 

Upon the request of the
Company, accompanied by a copy of the resolutions of the Board of Directors
certified by its Secretary or Assistant Secretary authorizing the execution of
any such amendment or supplemental indenture, and upon the filing with the
Trustee of evidence of the consent of Noteholders as aforesaid, the Trustee
shall join with the Company in the execution 

 

64

 

of such amendment
or supplemental indenture unless such amendment or supplemental indenture
affects the Trustee’s own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in is discretion, but shall not be
obligated to, enter into such amendment or supplemental indenture.

 

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

 

Section 11.3                                Effect
of Amendments and Supplemental Indentures

 

Any amendment or
supplemental indenture executed pursuant to the provisions of this
Article XI shall comply with the Trust Indenture Act, as then in effect;
provided that this Section 11.3 shall not require such amendment or
supplemental indenture or the Trustee to be qualified under the Trust Indenture
Act prior to the time such qualification is in fact required under the terms of
the Trust Indenture Act or the Indenture has been qualified under the Trust
Indenture Act, nor shall it constitute any admission or acknowledgement by any
party to such amendment or supplemental indenture that any such qualification
is required prior to the time such qualification is in fact required under the
terms of the Trust Indenture Act or the Indenture has been qualified under the
Trust Indenture Act.  Upon the execution
of any amendment or supplemental indenture pursuant to the provisions of this
Article XI, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitation of
rights, obligations, duties and immunities under this Indenture of the Trustee,
the Company and the holders of Notes shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.

 

Section 11.4                                Notation
on Notes

 

Notes authenticated and
delivered after the execution of any amendment or supplemental indenture
pursuant to the provisions of this Article XI may bear a notation in form
approved by the Trustee as to any matter provided for in such amendment or
supplemental indenture.  If the Company
or the Trustee shall so determine, new Notes so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such amendment or supplemental indenture may, at the
Company’s expense, be prepared and executed by the Company, authenticated by
the Trustee (or an authenticating agent duly appointed by the Trustee pursuant
to Section 17.10) and delivered in exchange for the Notes then
outstanding, upon surrender of such Notes then outstanding.

 

Section 11.5                                Evidence
of Compliance of Amendment or Supplemental Indenture to be Furnished to Trustee

 

The Trustee, subject to
the provisions of Sections 8.1 and 8.2, shall receive an Officer’s
Certificate and an Opinion of Counsel as conclusive evidence that any amendment
or 

 

65

 

supplemental
indenture executed pursuant hereto complies with the requirements of this
Article XI.

 

ARTICLE XII

 

CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

 

Section 12.1                                Company
May Consolidate, Etc.  

 

The Company shall not,
directly or indirectly, consolidate with or merge with or into any other Person
or sell, lease, convey or transfer all or substantially all its assets, whether
in a single transaction or a series of related transactions, to any Person or
group of affiliated Persons unless:

 

(a)                                  either
(i) in the case of a merger or consolidation that does not involve a
transfer of all or substantially all of the Company’s properties and assets,
the Company is the surviving entity or (ii) in case the Company shall
consolidate with or merge into another Person or sell, lease, convey or
transfer all or substantially all of its properties and assets, whether in a
single transaction or a series of related transactions, to any Person, the
Person formed by such consolidation or into which the Company is merged, or the
Person which acquires by sale, conveyance or transfer, or which leases the
properties and assets of the Company substantially as an entirety, shall be a
corporation, limited liability company, partnership or trust, shall be
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,
premium, if any, and interest (including Liquidated Damages, if any) on all of
the Notes as applicable, and the performance or observance of every covenant of
this Indenture on the part of the Company to be performed or observed and shall
have provided for the applicable conversion rights set forth in
Section 15.6 and the repurchase rights set forth in Article XVI;

 

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

 

(c)                                  the
Company has delivered to the Trustee an Officer’s 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 complies with this Article XII
and that all conditions precedent herein provided for relating to such transaction
have been complied with, together with any documents required under
Article IX.

 

Section 12.2                                Successor
Entity to be Substituted

 

In case of any such
consolidation, merger, sale, conveyance or lease in accordance with
Section 12.1, and, where required in accordance with Section 12.1(a)
upon the assumption by the 

 

66

 

successor entity,
by supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual payment of the
principal of and premium, if any, and interest (including Liquidated Damages,
if any) on all of the Notes and the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Company, such
successor entity shall succeed to and be substituted for the Company, with the
same effect as if it had been named herein as the party of the first part.  Such successor entity thereupon may cause to
be signed, and may issue either in its own name or in the name of Quixote
Corporation any or all of the Notes issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee; and, upon the
order of such successor entity instead of the Company and subject to all the
terms, conditions and limitations in this Indenture prescribed, the Trustee
shall authenticate and shall deliver, or cause to be authenticated and
delivered, any Notes which previously shall have been signed and delivered by
the officers of the Company to the Trustee for authentication, and any Notes
which such successor entity thereafter shall cause to be signed and delivered
to the Trustee for that purpose.  All the
Notes so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Notes theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Notes had
been issued at the date of the execution hereof.  In the event of any such consolidation,
merger, sale, conveyance or lease, the Person named as the “Company” in the
first paragraph of this Indenture or any successor which shall thereafter have
become such in the manner prescribed in this Article XII may be dissolved,
wound up and liquidated at any time thereafter and such Person shall be
released from its liabilities as obligor and maker of the Notes and from its
obligations under this Indenture.

 

In case of any such
consolidation, merger, sale, conveyance or lease, such changes in phraseology
and form (but not in substance) may be made in the Notes thereafter to be
issued as may be appropriate.

 

Section 12.3                                Opinion
of Counsel to be Given Trustee

 

The Trustee, subject to
Sections 8.1 and 8.2, shall receive an
Officer’s Certificate and an Opinion of Counsel as conclusive evidence that any
such consolidation, merger, sale, conveyance or lease and any such assumption
complies with the provisions of this Article XII.

 

ARTICLE XIII

 

SATISFACTION AND DISCHARGE OF INDENTURE

 

Section 13.1                                Discharge
of Indenture

 

When (a) the Company
shall deliver to the Trustee for cancellation all Notes theretofore
authenticated (other than any Notes that have been destroyed, lost or stolen
and in lieu of or in substitution for which other Notes shall have been
authenticated and delivered) and not theretofore canceled, or (b) all the
Notes not theretofore canceled or delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year or are to be called for redemption within one year
under arrangements 

 

67

 

satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the Notes (other than any Notes which shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for
which other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest (including Liquidated Damages, if any) due or to
become due to such date of maturity or redemption date, as the case may be, and
if in either case the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect (except as to (i) remaining rights of registration of
transfer, substitution and exchange and conversion of Notes, (ii) rights hereunder
of Noteholders to receive payments of principal of and premium, if any, and
interest on, the Notes and the other rights, duties and obligations of
Noteholders, as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights, obligations and
immunities of the Trustee hereunder), and the Trustee, on demand of the Company
accompanied by an Officer’s Certificate and an Opinion of Counsel as required
by Section 17.5 and at the cost and expense of the Company, shall execute
proper instruments acknowledging satisfaction of and discharging this
Indenture; the Company, however, hereby agreeing to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred by the
Trustee and to compensate the Trustee for any services thereafter reasonably
and properly rendered by the Trustee in connection with this Indenture or the
Notes.

 

Section 13.2                                Deposited
Monies to be Held in Trust by Trustee

 

Subject to
Section 13.4, all monies deposited with the Trustee pursuant to
Section 13.1 shall be held in trust and applied by it to the payment,
either directly or through any paying agent (including the Company if acting as
its own paying agent), to the holders of the particular Notes for the payment
or redemption of which such monies have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest and premium, if
any.

 

Section 13.3                                Paying
Agent to Repay Monies Held

 

Upon the satisfaction and
discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon demand of the Company, be repaid to
it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such monies.

 

Section 13.4                                Return
of Unclaimed Monies

 

Subject to the
requirements of applicable law, any monies deposited with or paid to the
Trustee for payment of the principal of, premium, if any, or interest on Notes
and not applied but remaining unclaimed by the holders of Notes for two (2)
years after the date upon which the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on such Notes, as the case may be, shall
have become due and payable, shall be repaid to the Company by the Trustee on
written demand and all liability of the Trustee shall thereupon cease with
respect to such monies; and the holder of any of the Notes shall thereafter
look only to the Company for 

 

68

 

any
payment which such holder may be entitled to collect unless an applicable
abandoned property law designates another Person.

 

Section 13.5                                Reinstatement

 

If (i) the Trustee
or the paying agent is unable to apply any money in accordance with
Section 13.2 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application and (ii) the holders of at least a majority in principal
amount of the then outstanding Notes so request by written notice to the
Trustee, the Company’s obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to
Section 13.1 until such time as the Trustee or the paying agent is
permitted to apply all such money in accordance with Section 13.2; provided,
however, that if the Company makes any payment of interest on or
principal of any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Notes to receive
such payment from the money held by the Trustee or paying agent.

 

ARTICLE XIV

 

NO RECOURSE AGAINST OTHERS

 

Section 14.1                                Indenture
and Notes Solely Corporate Obligations

 

No direct or indirect
partner, employee, incorporator, shareholder, director or officer, as such,
past, present or future of the Company or any successor corporation or any
Subsidiary or any of the Company’s Affiliates, shall have any personal
liability in respect of the obligations of the Company under the Notes or this
Indenture by reason of his, her or its status as such partner, employee,
incorporator, shareholder, director or officer. 
Each Noteholder by accepting a Note waives and releases all such
liability.  Such waiver and release are
part of the consideration for the issuance of the Notes.

 

ARTICLE XV

 

CONVERSION OF NOTES

 

Section 15.1                                Right
to Convert

 

Subject to and upon
compliance with the provisions of this Indenture, the holder of any Note shall
have the right, at the holder’s option, at any time following the date of original
issuance of the Notes and prior to the close of business on February 15, 2025
(except that, with respect to any Note or portion of a Note that shall be
called for redemption or automatic conversion, such right shall terminate,
except as provided in the fifth paragraph of Section 15.2 and
Section 3.4, at the close of business on the last Business Day prior to
the date fixed for redemption or automatic conversion, as applicable, of such
Note or portion of a Note unless the Company shall default in payment due upon
redemption or automatic conversion thereof, as

 

69

 

applicable), to
convert the principal amount of any such Note, or any portion of such principal
amount which is One Thousand United States Dollars ($1,000) or an integral
multiple thereof, into that number of fully paid and non-assessable shares of
Common Stock (as such shares shall then be constituted) obtained by dividing
the principal amount of the Note or portion thereof surrendered for conversion
by the Conversion Price in effect at such time in the manner provided in
Section 15.2.  A holder of Notes is
not entitled to any rights of a holder of Common Stock until such holder has
converted his Notes to Common Stock, and only to the extent such Notes are
deemed to have been converted to Common Stock under this Article XV.  A Note with respect to which a holder has
delivered a notice in accordance with Section 16.2 regarding such holder’s
election to require the Company to repurchase such holder’s Notes following the
occurrence of a Repurchase Event may be converted in accordance with this
Article XV only if such holder withdraws such repurchase notice by
delivering a written notice of withdrawal to the Company prior to the close of
business on the last Business Day prior to the day fixed for repurchase.

 

Section 15.2                                Exercise
of Conversion Privilege; Issuance of Common Stock on Conversion

 

In order to exercise the
conversion privilege with respect to any Definitive Note, the holder of such
Definitive Note then registered on the books of the Company shall
(i) deliver a written notice, in the form of the conversion notice
attached hereto as Exhibit B, or a facsimile thereof (the “Conversion
Notice”), to the Trustee, the Company (with a copy to the Company’s legal
counsel) and the transfer agent at Equiserve Trust Company, N.A., 1 North State
Street, 11th Floor, Chicago, Illinois 60602, telephone (312)
499-7032, facsimile (312) 499-7065, Attention: Tammie Marshall, of such holder’s
election to convert, which notice shall specify that all of such Note shall be
converted or the portion thereof to be converted (which shall be One Thousand
United States Dollars ($1,000) or an integral multiple thereof) and the name or
names (with address) in which the shares of Common Stock which shall be
issuable on such conversion shall be issued, (ii) if such Note or portion
thereof is surrendered for conversion during the period from the close of
business on the Business Day preceding the record date for any Interest Payment
Date through the close of business on the Business Day next preceding such
Interest Payment Date, pay by wire transfer of immediately available funds or
other method acceptable to the Company, an amount equal to the interest
otherwise payable on such Interest Payment Date on the principal amount being
converted (unless such Note or portion thereof being converted shall have been
called for redemption pursuant to a redemption notice sent to the Noteholders
in accordance with Section 3.2 or shall have become due prior to such
Interest Payment Date as a result of exercise of the repurchase right set forth
in Article XVI); provided, however, that no such payment need be
made if there shall exist at the time of conversion a default in the payment of
interest on the Notes,  (iii) pay by
wire transfer of immediately available funds or other method acceptable to the
Company the transfer taxes, if any, required pursuant to Section 15.7, and
(iv) surrender the Definitive Note to be converted in whole or in part to
a common carrier for overnight delivery to the Company as soon as practicable
following such date (or an indemnification undertaking or other form of
security reasonably satisfactory to the Company with respect to the Definitive
Note in the case of its loss, theft or destruction).  Anything herein to the contrary notwithstanding,
in the case of Global Securities, conversion notices may be delivered and a
Participant’s interest in a Global Note may be surrendered for conversion in 

 

70

 

accordance
with the Applicable Procedures as in effect from time to time.  Each Note surrendered for conversion shall,
unless the shares issuable on conversion are to be issued in the same name as
the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer (including a broker’s letter regarding compliance with
the prospectus delivery requirement, if applicable) in form satisfactory to the
Company duly executed by, the holder or his duly authorized attorney.

 

The Company shall use its
best efforts to, within three (3) Business Days after the Conversion Date (as
defined below) with respect to any Note, subject to compliance with any
restrictions on transfer if shares issuable on conversion are to be issued in a
name other than that of the Noteholder (as if such transfer were a transfer of
the Note or Notes (or portion thereof) so converted) (a)(i) in the case of a
resale of the Common Stock issuable upon such conversion, at the holder’s
request, credit such aggregate number of shares of Common Stock to which the
holder shall be entitled to the holder’s or its designee’s balance account with
The Depository Trust Company through its Deposit Withdrawal Agent Commission
system or (ii) issue and deliver to the address as specified in the Conversion
Notice, a certificate, registered in the name of the holder or its designee,
for the number of full shares of Common Stock to which the holder shall be
entitled upon such conversion, and (b) deliver to such holder a check or cash
in respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 15.4 (which payment,
if any, shall be paid no later than five (5) Business Days after the Conversion
Date).  In case any Note of a
denomination greater than One Thousand United States Dollars ($1,000) shall be
surrendered for partial conversion, and subject to Section 2.3, the
Company shall execute and the Trustee shall authenticate and deliver to the
holder of the Note so surrendered, without charge to him, a new Note or Notes
in authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.

 

Subject to Article IV, if
the Company shall not have delivered the number of shares of Common Stock
issued upon conversion of Notes by any holder within five (5) Business Days
after the Conversion Date with respect to such Notes, the Company shall pay
Liquidated Damages to such holder at the rate of one-half percent (0.5%) per
month of the outstanding principal amount of Notes so converted by such holder.

 

The conversion shall be
deemed to have been effected as to any such Note (or portion thereof) on the
date on which the requirements set forth above in this Section 15.2 have
been satisfied as to such Note (or portion thereof) (such date, the “Conversion
Date”), and the Person in whose name any shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become on the Conversion
Date the holder of record of the shares represented thereby; provided, however,
that any such surrender on any date when the stock transfer books of the
Company shall be closed shall constitute the Person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date upon which such Note
shall be surrendered.  For purposes of
determining satisfaction of the requirement set forth above with respect to the
Conversion Date for any Note, any facsimile required to be sent shall be deemed
to have been sent on a given day if such facsimile was received before 1:00
p.m., New York City time, on such date, to the number listed above (unless 

 

71

 

a
different number is specified in a notice filed with the Trustee and sent by
the Trustee, at the Company’s expense, to each holder of the Notes at such
holder’s address appearing in the Note Register, as provided for in
Section 2.5 of this Indenture) and a confirmation of transmission of such
facsimile is obtained.

 

The Company shall pay in
cash, on any Note or portion thereof surrendered for conversion during the
period from the close of business on any Interest Payment Date to which
interest has been fully paid through the close of business on the Business Day
preceding the record date for the next such Interest Payment Date, accrued and
unpaid interest, if any, on the Note or portion thereof surrendered for
conversion to, but excluding, the date of conversion, and Liquidated Damages,
if any.  Subject to Article IV, any such
payment of interest shall be made with respect to such Note within ten (10)
Business Days after the Conversion Date. 
Notwithstanding the foregoing, any Note or portion thereof surrendered
for conversion during the period from the close of business on the record date
for any Interest Payment Date through the close of business on the Business Day
next preceding such Interest Payment Date shall (unless such Note or portion
thereof being converted shall have been called for redemption pursuant to a
redemption notice sent to the Noteholders in accordance with Section 3.2
or shall have become due prior to such Interest Payment Date as a result of
exercise of the repurchase right set forth in Article XVI) be accompanied by
payment, in immediately available funds or other funds acceptable to the
Company, of an amount equal to the interest otherwise payable on such Interest
Payment Date on the principal amount being converted; provided, however,
that no such payment need be made if there shall exist at the time of
conversion a default in the payment of interest on the Notes.  Nothing in this Section 15.2 shall affect the
right of a holder in whose name any Note is registered at the close of business
on a record date to receive the interest payable on such Note on the related
Interest Payment Date in accordance with the terms of this Indenture and the
Note.  Except as provided in this
Section 15.2, no adjustment shall be made for interest accrued on any Note
converted or for dividends on any shares issued upon the conversion of such
Note as provided in this Article.

 

Section 15.3                                Company
Right to Force Automatic Conversion

 

The Company may, at its
option, automatically convert all or a portion of the Notes (an “Automatic Conversion”)
at any time prior to February 15, 2025 if the following conditions have been
satisfied:

 

(a)                                  the
Closing Price (as defined in Section 15.6(e)) per share of the Common Stock has
exceeded one hundred and fifty percent (150%) of the Conversion Price then in
effect for at least twenty (20) Trading Days within a period of thirty (30)
consecutive Trading Days ending within the thirty (30) Trading Days prior to
the date the Automatic Conversion Notice (defined below) specifying the date
(the “Automatic Conversion Date”) on which an Automatic Conversion will become
effective is sent to all holders of Notes;

 

(b)                                 (i)
the shares of Common Stock to be issued do not require registration or approval
under any federal securities law before such shares may be freely transferable
without being subject to any transfer restrictions under the Securities Act or
such registration is completed or becomes effective prior to the delivery of
the Automatic Conversion Notice and 

 

72

 

such completion
and effectiveness is maintained from after delivery of such Automatic
Conversion Notice to the Automatic Conversion Date, (ii) the shares of Common
Stock to be issued do not require registration or qualification under any state
securities law before such shares may be validly issued or delivered or such
registration or qualification is completed or becomes effective prior to the
delivery of the Automatic Conversion Notice and such completion and
effectiveness is maintained from after delivery of such Automatic Conversion
Notice to the Automatic Conversion Date, and (iii) the issuance of the shares
of Common Stock to be issued does not violate any Federal or state securities
laws;

 

(c)                                  the
shares of Common Stock to be issued shall have been listed or approved for
listing on the NYSE, AMEX, or NASDAQ, prior to the delivery of the Automatic
Conversion Notice;

 

(d)                                 the
Company shall have sufficient authorized but unissued (or issued but not
outstanding) shares of Common Stock (or, in the event of a merger,
consolidation or other similar transaction involving the Company that is
otherwise permitted under the terms of this Indenture in which the Company is
not the surviving entity, out of the authorized but unissued Common Stock of
the surviving entity or its direct or indirect parent entity) to issue the
shares of Common Stock to be issued upon such conversion;

 

(e)                                  the issuance of the shares of Common Stock to be issued does
not require approval of the Company’s stockholders;

 

(f)                                    the shares of Common Stock to be issued, upon issue, will be
duly and validly issued and fully paid and nonassessable and free of any
preemptive rights; and

 

(g)                                 the Company is not prevented from making the Company
Conversion Provisional Payment (as defined below) on the Automatic Conversion
Date as a result of the provisions of Section 4.2.

 

Subject to Article IV, if
the Automatic Conversion Date is prior to February 15, 2008, the Company shall
make an additional payment to each holder of Notes with respect to the Notes
converted, in an amount equal to $210 per each One Thousand United States
Dollars ($1,000) principal amount of the Note (the “Company Conversion
Provisional Payment”), less the amount of any interest actually paid on the
portion of the principal amount of the Note to be converted prior to the
Automatic Conversion Date (and, if the Note is converted between a record date
and the next Interest Payment Date, less interest payable on each One Thousand
United States Dollars ($1,000) principal amount of the Note on such next
Interest Payment Date).

 

Unless the Company shall
have theretofore called for redemption all of the Notes then outstanding, if
the Company elects to convert all or a portion of the Notes pursuant to this
Section 15.3, the Company, or at its request (which must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below unless a shorter period is agreed
to by the Trustee), the Trustee in the name of and at the expense of the
Company, shall send or cause to be sent a notice (the “Automatic Conversion
Notice”) of the Automatic Conversion not more than thirty (30) days but not
less than five (5) days before 

 

73

 

the
Automatic Conversion Date to such holders at their last addresses as they shall
appear upon the Notes Register.  Such
notice shall be irrevocable.  Any notice
that is sent in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the registered holder receives the
notice.  In any case, failure to duly
give such notice to the holder of any Notes designated for redemption in whole
or in part, or any defect in the notice, shall not affect the validity of the
proceedings for the automatic conversion of any other Notes.

 

Each Automatic Conversion
Notice shall state:

 

(a)                                  The
Automatic Conversion Date,

 

(b)                                 the CUSIP number(s) of the Note(s) to be automatically
converted,

 

(c)                                  the place or places where such Notes are to be surrendered
for conversion,

 

(d)                                 the Conversion Price then in effect,

 

(e)                                  the amount of the Company Conversion Provisional Payment and

 

(f)                                    the Additional Shares, if any, to be issued pursuant to
Section 15.13.

 

In case the Notes are to
be converted in part only, the Automatic Conversion Notice shall state the
portion of the principal amount thereof to be converted and shall state that on
and after the Automatic Conversion Date, upon surrender of such Note, a new
Note or Notes in principal amount equal to the unconverted portion thereof will
be issued.

 

If any of the foregoing
provisions or other provisions of this Section are inconsistent with applicable
law, such law shall govern.

 

In the event of an
Automatic Conversion, the Company shall issue and deliver a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion of the Notes or, at the holder’s request, credit such aggregate
number of shares of Common Stock to which the holder shall be entitled to the
holder’s balance account with the Depositary through its Deposit Withdrawal
Agent Commission system, along with (i) any cash in respect of any fractional
shares of Common Stock otherwise issuable upon conversion (as provided in
Section 15.4), and (ii) the Company Conversion Provisional Payment, if any, for
payment to the holder as promptly after the Automatic Conversion Date as
practicable in accordance with the provisions of this Section 15.3.

 

All Notes subject to the
Automatic Conversion shall be delivered to the Company to be canceled.  Failure to deliver such Notes shall not
affect their automatic cancellation.

 

Section 15.4                                Cash
Payments in Lieu of Fractional Shares

 

No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon
conversion of Notes.  If more than one
Note shall be surrendered for conversion at one time by the same holder, the
number of full shares which shall be issuable upon conversion 

 

74

 

thereof
shall be computed on the basis of the aggregate principal amount of the
Notes (or specified portions thereof to the extent permitted hereby) so
surrendered for conversion.  If any
fractional share of stock otherwise would be issuable upon the conversion of
any Note or Notes, the Company shall calculate and pay a cash adjustment in
lieu of such fractional share at the current market value thereof to the holder
of Notes.  For purposes of this Section
15.4, the current market value of a share of Common Stock shall be the Closing
Price (determined as provided in Section 15.6(e)) on the first Trading Day
immediately preceding the day on which the Notes (or specified portions
thereof) are deemed to have been converted.

 

Section 15.5                                Conversion
Price

 

The
conversion price shall be as specified in the form of Note (herein called the “Conversion
Price”) attached as Exhibit A hereto, subject to adjustment as
provided in this Article XV.

 

Section 15.6                                Adjustment
of Conversion Price

 

The Conversion Price
shall be adjusted from time to time by the Company as follows:

 

(a)                                  In
case the Company shall hereafter pay a dividend or make a distribution to all
holders of the outstanding Common Stock in shares of Common Stock, the
Conversion Price in effect at the opening of business on the date following the
date fixed for the determination of shareholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction of which (i) the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the Record Date (as
defined in Section 15.6(e)) fixed for such determination and (ii) the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction in the
Conversion Price to become effective immediately after the opening of business
on the day following the Record Date.  If
any dividend or distribution of the type described in this Section 15.6(a)
is declared but not so paid or made, the Conversion Price shall again be
adjusted to the Conversion Price which would then be in effect if such dividend
or distribution had not been declared.

 

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

 

75

 

(c)                                  In
case the Company shall issue rights or warrants to all holders of its
outstanding shares of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Current Market Price
(as defined in Section 15.6(e)) on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect at the opening of
business on the date after such Record Date by a fraction of which (i) the
numerator shall be the sum of the number of shares of Common Stock outstanding
at the close of business on the Record Date plus the number of shares that the
aggregate offering price of the total number of shares so offered for
subscription or purchase would purchase at such Current Market Price, and of
which (ii) the denominator shall be the sum of the number of shares of Common
Stock outstanding at the close of business on the Record Date plus the total
number of additional shares of Common Stock so offered for subscription or
purchase.  Such adjustment shall become
effective immediately after the opening of business on the day following the
Record Date fixed for determination of shareholders entitled to receive such
rights or warrants.  To the extent that
shares of Common Stock are not delivered pursuant to such rights or warrants,
upon the expiration or termination of such rights or warrants the Conversion
Price shall be readjusted to the Conversion Price that would then be in effect
had the adjustments made upon the issuance of such rights or warrants been made
on the basis of delivery of only the number of shares of Common Stock actually
delivered.  In the event that such rights
or warrants are not so issued, the Conversion Price shall again be adjusted to
be the Conversion Price that would then be in effect if such date fixed for the
determination of shareholders entitled to receive such rights or warrants had
not been fixed.  In determining whether
any rights or warrants entitle the holders to subscribe for or purchase shares
of Common Stock at less than such Current Market Price, and in determining the
aggregate offering price of such shares of Common Stock, there shall be taken
into account any consideration received for such rights or warrants, the value
of such consideration, if other than cash, to be determined in good faith by
the Board of Directors.

 

(d)                                 In
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock shares of any class of capital stock of the Company (other
than any dividends or distributions to which Section 15.6(a) applies) or
evidences of its indebtedness or other assets (including securities, but
excluding (1) any rights or warrants referred to in Section 15.6(c)
and (2) dividends and distributions paid exclusively in cash (except as
set forth in Section 15.6(e), (the foregoing hereinafter in this
Section 15.6(d) called the “Additional Securities”)), unless the Company
elects to reserve such Additional Securities for distribution to the
Noteholders upon conversion of the Notes so that any such holder converting
Notes will receive upon such conversion, in addition to the shares of Common
Stock to which such holder is entitled, the amount and kind of such Additional
Securities which such holder would have received if such holder had converted
its Notes into Common Stock immediately prior to the Record Date (as defined in
Section 15.6(e)) for such distribution of the Additional Securities then,
in each such case, the Conversion Price shall be reduced so that the same shall
be equal to the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the Record Date with respect to
such distribution by a fraction of which (i) 

 

76

 

the numerator shall be the Current Market Price
(determined as provided in Section 15.6(e)) on such date less the fair
market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on such
date of the portion of the Additional Securities so distributed applicable to
one share of Common Stock and (ii) the denominator shall be such Current Market
Price, such reduction to become effective immediately prior to the opening of
business on the day following the Record Date; provided, however,
that in the event the then fair market value (as so determined) of the portion
of the Additional Securities so distributed applicable to one share of Common
Stock is equal to or greater than the Current Market Price on the Record Date,
in lieu of the foregoing adjustment, adequate provision shall be made so that
each Noteholder shall have the right to receive upon conversion of a Note (or
any portion thereof) the amount of Common Stock such holder would have received
had such holder converted such Note (or portion thereof) immediately prior to
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 15.6(d) by
reference to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so consider the
prices in such market over the same period (the “Reference Period”) used in
computing the Current Market Price pursuant to Section 15.6(e) to the
extent possible, unless the Board of Directors in a Board Resolution determines
in good faith that determining the fair market value during the Reference
Period would not be in the best interest of the Noteholder.

 

In the event that the
Company implements a new shareholder rights plan, such rights plan shall
provide that upon conversion of the Notes the holders will receive, in addition
to the Common Stock issuable upon such conversion, the rights issued under such
rights plan as if the holders had converted the Notes prior to implementing the
rights plan and notwithstanding the occurrence of an event causing such rights
to separate from the Common Stock at or prior to the time of conversion.  Any distribution of rights or warrants
pursuant to a shareholder rights plan complying with the requirements set forth
in the immediately preceding sentence of this paragraph shall not constitute a
distribution of rights or warrants for the purposes of this
Section 15.6(d).

 

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 15.6(d) (and no adjustment to the Conversion
Price under this Section 15.6(d) will be required) until the occurrence of
the earliest Trigger Event.  If such
right or warrant is subject to subsequent events, upon the occurrence of which
such right or warrant shall become exercisable to purchase different
securities, evidences of indebtedness or other assets or entitles the holder to
purchase a 

 

77

 

different
number or amount of the foregoing or to purchase any of the foregoing at a
different purchase price, then the occurrence of each such event shall be
deemed to be the date of issuance and record date with respect to a new right
or warrant (and a termination or expiration of the existing right or warrant
without exercise by the holder 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 resulted in an
adjustment to the Conversion Price under this Section 15.6(d), (1) in
the case of any such rights or warrants that shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Price shall
be readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder of Common Stock with respect to such rights 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 all of which shall have expired or been terminated
without exercise, the Conversion Price shall be readjusted as if such rights
and warrants had never been issued.

 

For purposes of this
Section 15.6(d) and Sections 15.6(a) and (c), any dividend or
distribution to which this Section 15.6(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which Section 15.6(a) or 15.6(c)
applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital stock,
rights or warrants other than such shares of Common Stock or rights or warrants
to which Section 15.6(c) applies (and any Conversion Price reduction
required by this Section 15.6(d) with respect to such dividend or distribution
shall then be made) immediately followed by (2) a dividend or distribution
of such shares of Common Stock or such rights or warrants (and any further
Conversion Price reduction required by Sections 15.6(a) and (c) with
respect to such dividend or distribution shall then be made, except
(A) the Record Date of such dividend or distribution shall be substituted
as “the date fixed for the determination of shareholders entitled to receive
such dividend or other distribution”, “Record Date fixed for such determination”
and “Record Date” within the meaning of Section 15.6(a) and as “the date
fixed for the determination of shareholders entitled to receive such rights or
warrants”, “the Record Date fixed for the determination of the shareholders
entitled to receive such rights or warrants” and “such Record Date” within the
meaning of Section 15.6(c) and (B) any shares of Common Stock included
in such dividend or distribution shall not be deemed “outstanding at the close
of business on the date fixed for such determination” within the meaning of
Section 15.6(a).

 

In case the Company
shall, by dividend or otherwise, distribute to all holders of its Common Stock
cash (excluding any cash that is distributed upon a merger or consolidation to
which Section 15.7 applies or as part of a distribution referred to in Section
15.6), then immediately after the close of business on the Record Date for the distribution,
the Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on such Record Date by a fraction (i) the numerator of
which shall be equal to

 

78

 

the
Current Market Price on the Record Date less an amount equal to the quotient of
(x) such combined amount and (y) the number of shares of Common Stock
outstanding on the Record Date and (ii) the denominator of which shall be equal
to the Current Market Price on such date; provided, however, that in the event
the portion of the cash so distributed applicable to one (1) share of Common
Stock is equal to or greater than the Current Market Price of the Common Stock
on the Record Date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each holder shall have the right to receive upon
conversion of a Note (or any portion thereof) the amount of cash such holder
would have received had such holder converted such Note (or portion thereof)
immediately prior to 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 that
would then be in effect if such dividend or distribution had not been declared.
Notwithstanding anything to the contrary herein, the adjustment required by
this paragraph shall not be required as a result of cash dividends paid by the
Company in an aggregate amount equal to or less than $0.36 per share
(appropriately adjusted for any share dividends on or subdivisions or
combinations of the Common Stock) in any fiscal year of the Company.

 

(e)                                  For
purposes of this Section 15.6, the following terms shall have the meaning
indicated:

 

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

 

(2)                                   “Current Market Price” shall mean the average of
the daily Closing Prices per share of Common Stock for the ten (10) consecutive
Trading Days immediately prior to the date in question; provided, however,
that (1) if the “ex” date (as hereinafter defined) for any event (other
than the issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 15.6(a), (b), (c)
or (d) occurs during such ten (10) consecutive Trading Days, the Closing Price
for each Trading Day prior to the “ex” date for such other event shall be
adjusted by multiplying such Closing Price by the same 

 

79

 

fraction by which the Conversion Price is so required
to be adjusted as a result of such other event, (2) if the “ex” date for
any event (other than the issuance or distribution requiring such computation)
that requires an adjustment to the Conversion Price pursuant to
Section 15.6(a), (b), (c) or (d) occurs on or after the “ex” date for the
issuance or distribution requiring such computation and prior to the day in
question, the Closing Price for each Trading Day on and after the “ex” date for
such other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, and (3) if the “ex” date for the
issuance or distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant to
clause (1) or (2) of this proviso, the Closing Price for each Trading
Day on or after such “ex” date shall be adjusted by adding thereto the amount
of any cash and the fair market value (as determined in good faith by the
Company’s Board of Directors in a manner consistent with any determination of
such value for purposes of Section 15.6(d), whose determination shall be
conclusive and described in a Board Resolution) of the evidences of
indebtedness, shares of capital stock or assets being distributed applicable to
one share of Common Stock as of the close of business on the day before such “ex”
date.  For purposes of this paragraph,
the term “ex” date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the Closing Price
was obtained without the right to receive such issuance or distribution and
(2) when used with respect to any subdivision or combination of shares of
Common Stock, means the first date on which the Common Stock trades regular way
on such exchange or in such market after the time at which such subdivision or
combination becomes effective. 
Notwithstanding the foregoing, whenever successive adjustments to the
Conversion Price are called for pursuant to this Section 15.6, such
adjustments shall be made to the Current Market Price as may be necessary or
appropriate to effectuate the intent of this Section 15.6 and to avoid
unjust or inequitable results as determined in good faith by the Board of
Directors.

 

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

 

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

 

(5)                                  “Trading
Day” shall mean (x) if the applicable security is listed or admitted for
trading on the New York Stock Exchange or another national security exchange, a
day on which the New York Stock Exchange or such other 

 

80

 

national
security exchange, as applicable, is open for business or (y) if the
applicable security is quoted on the Nasdaq National Market, a day on which
trades may be made thereon or (z) if the applicable security is not so
listed, admitted for trading or quoted, a Business Day.

 

(f)                                    The
Company may make such reductions in the Conversion Price, in addition to those
required by Sections 15.6(a), (b), (c) or (d), as the Board of Directors
considers to be advisable to avoid or diminish any income tax to holders of
Common Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.

 

(g)                                 To
the extent permitted by applicable law, the Company from time to time may
reduce the Conversion Price by any amount for any period of time if the period
is at least twenty (20) days, the reduction is irrevocable during the period
and the Board of Directors shall have made a determination that such reduction
would be in the best interests of the Company, which determination shall be
conclusive and described in a Board Resolution. 
Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall send to the holder of each Note at his last address
appearing on the Note Register provided for in Section 2.5 a notice of the
reduction at least five (5) days prior to the date the reduced Conversion Price
takes effect, and such notice shall state the reduced Conversion Price and the
period during which it will be in effect.

 

(h)                                 No
adjustment in the Conversion Price shall be required under this
Section 15.6 unless such adjustment would require an increase or decrease
of at least one percent (1%) in such price; provided, however,
that any adjustments which by reason of this Section 15.6 (h) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Article XV shall be made by the Company and shall be made to
the nearest cent or to the nearest one hundredth of a share, as the case may
be.  No adjustment need be made for a
change in the par value or no par value of the Common Stock.

 

(i)                                     Subject
to Section 15.6(f), whenever the Conversion Price is adjusted as provided in
this Section 15.6, the Company shall promptly file with the Trustee and
any conversion agent other than the Trustee an Officer’s Certificate setting
forth the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.  Promptly after delivery of such certificate,
the Company shall prepare a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price and the date on which each
adjustment becomes effective and shall send such notice of such adjustment of
the Conversion Price to the holder of each Note at his last address appearing
on the Note Register provided for in Section 2.5, within twenty (20) days
of the effective date of such adjustment. 
Failure to deliver such notice shall not effect
the legality or validity of any such adjustment.

 

(j)                                     In
any case in which this Section 15.6 provides that an adjustment shall
become effective immediately after a Record Date for an event, the Company may
defer until the occurrence of such event (i) issuing to the holder of any
Note converted after 

 

81

 

such Record Date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and above the Common Stock
issuable upon such conversion before giving effect to such adjustment and
(ii) paying to such holder any amount in cash in lieu of any fraction
pursuant to Section 15.4.

 

(k)                                  For
purposes of this Section 15.6, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock. 
The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.

 

Section 15.7                                Effect
of Reclassification, Consolidation, Merger or Sale

 

Subject to the provisions
of Article XVI, if any of the following events occur, namely (i) any
reclassification or change of the outstanding shares of Common Stock (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), (ii) any
consolidation, merger or combination of the Company with another Person as a
result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock (other than as a result of a change in name, a
change in par value or a change in the jurisdiction of incorporation),
(iii) any statutory exchange as a result of which holders of Common Stock
generally shall be entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such Common Stock
(such transaction, a “Statutory Exchange”), or (iv) any sale or conveyance
of the properties and assets of the Company as, or substantially as, an entirety
to any other Person as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, then the Company or
the successor or purchasing Person, as the case may be, shall execute with the
Trustee a supplemental indenture (which shall comply with the Trust Indenture
Act as in force at the date of execution of such supplemental indenture if such
supplemental indenture is then required to so comply) providing that such Note
shall be convertible into the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, Statutory Exchange, sale or
conveyance by a holder of a number of shares of Common Stock issuable upon
conversion of such Notes (assuming, for such purposes, a sufficient number of
authorized shares of Common Stock available to convert all such Notes)
immediately prior to such reclassification, change, consolidation, merger,
combination, Statutory Exchange, sale or conveyance assuming such holder of
Common Stock did not exercise his rights of election, if any, that holders of
Common Stock who were entitled to vote or consent to such transaction had as to
the kind or amount of securities, cash or other property receivable upon such
consolidation, merger, combination, Statutory Exchange, sale or conveyance
(provided that, if the kind or amount of securities, cash or other property
receivable upon such consolidation, merger, combination, Statutory Exchange,
sale or conveyance is not the same for each share of Common Stock in respect of
which such rights of election shall not have been exercised (“non-electing
share”), then for the purposes of this Section 15.7 the kind and amount of
securities, cash or other property receivable upon such

 

82

 

consolidation,
merger, combination, Statutory Exchange, sale or conveyance for each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). 
Such supplemental indenture shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article XV.  If, in the case of any
such reclassification, change, consolidation, merger, combination, Statutory
Exchange, sale or conveyance, the stock or other securities and assets receivable
thereupon by a holder of shares of Common Stock include shares of stock or
other securities and assets of a Person other than the successor or purchasing
Person, as the case may be, in such reclassification, change, consolidation,
merger, combination, Statutory Exchange, 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 Notes as the Company’s Board of Directors shall reasonably consider
necessary by reason of the foregoing, including to the extent practicable the
provisions providing for the repurchase rights set forth in Article XVI
herein.

 

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

 

The above provisions of
this Section 15.7 shall similarly apply to successive reclassifications,
changes, consolidations, mergers, combinations, sales and conveyances.

 

If this Section 15.7
applies to any event or occurrence, Section 15.6 shall not apply.

 

Section 15.8                                Taxes
on Shares Issued

 

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

 

Section 15.9                                Reservation
of Shares; Shares to be Fully Paid; Listing of Common Stock

 

The Company shall
provide, free from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, reserved for the purpose of issuance, no less than
one hundred five percent (105%) of the number of shares of Common Stock needed
to provide for the issuance of Common Stock upon conversion of all of the Notes
without regard to any limitations on conversions or exercise.

 

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 

 

83

 

terms to be observed or performed by it
hereunder.  Without limiting the
generality of the foregoing, the Company (i) will not increase the par
value of any shares of Common Stock issuable upon conversion of the Notes above
the Conversion Price then in effect, (ii) will take all such actions as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of Common Stock upon
conversion of the Notes and (iii) will not take any action which results
in any adjustment of the Conversion Price if the total number of shares of
Common Stock issuable after the conversion of all of the Notes would exceed the
total number of shares of Common Stock then authorized by the Company’s
articles of incorporation and available for the purpose of issue upon such
exercise.

 

The Company covenants
that all shares of Common Stock issued upon conversion of Notes will be fully
paid and non-assessable by the Company and free from all taxes, liens and
charges with respect to the issue thereof.

 

The Company is obligated to register the Notes and the
shares of Common Stock issuable upon conversion of the Notes for resale under
the Securities Act pursuant to the Registration Rights Agreement.  The Notes and the shares of Common Stock
issuable upon conversion of the Notes shall constitute Registrable Securities
(as such term is defined in the Registration Rights Agreement).  Each holder of Notes shall be entitled to all
of the benefits afforded to a holder of Registrable Securities under the
Registration Rights Agreement and such holder, by its acceptance of a Note,
agrees and shall agree to be bound by and to comply with the terms and
conditions of the Registration Rights Agreement applicable to such holder as a
holder of such Registrable Securities.

 

The Company shall use
commercially reasonable efforts to promptly secure the listing of the shares of
Common Stock issuable upon conversion of a Note upon each national securities
exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance upon conversion
of such Note) and shall use commercially reasonable efforts to maintain, so
long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the conversion of
all then outstanding Notes; and the Company shall use commercially reasonable
efforts to list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other
shares of capital stock of the Company issuable upon conversion of the Notes if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.  The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 15.9.

 

Section 15.10                          Responsibility
of Trustee

 

The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to any
holder of Notes to determine whether any facts exist which may require any
adjustment of the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed,
in making the same.  The Trustee and any
other conversion agent shall not be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any securities
or property, which may at any 

 

84

 

time
be issued or delivered upon the conversion of any Note; and the Trustee and any
other conversion agent make no representations with respect thereto.  Subject to the provisions of
Section 8.1, neither the Trustee nor any conversion agent shall be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Note for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Article.  Without limiting the
generality of the foregoing, neither the Trustee nor any conversion agent shall
be under any responsibility to determine whether a supplemental indenture need
be entered into under Section 15.7 or the correctness of any provisions
contained in any supplemental indenture entered into pursuant to such section
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by Noteholders upon the conversion of
their Notes after any event referred to in such Section 15.7 or to any
adjustment to be made with respect thereto, but, subject to the provisions of
Section 8.1, may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, the Officer’s
Certificate (which the Company shall be obligated to file with the Trustee
prior to the execution of any such supplemental indenture) with respect
thereto.

 

Section 15.11                          Notice
to Holders Prior to Certain Actions

 

In case:

 

(a)                                  the
Company shall declare a dividend (or any other distribution) on its Common
Stock; or

 

(b)                                 the
Company shall authorize the granting to the holders of its Common Stock of
rights or warrants to subscribe for or purchase any share of any class or any
other rights or warrants; or

 

(c)                                  of
any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value),
or of any consolidation or merger to which the Company is a party and for which
approval of any shareholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or

 

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

 

the Company shall cause
to be filed with the Trustee and to be sent to each holder of Notes at his
address appearing on the Note Register, provided for in Section 2.5 of
this Indenture, as promptly as possible but in any event at least fifteen (15)
days prior to the applicable date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights are to be determined, or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become
effective or occur, 

 

85

 

and the date as of which
it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up.  Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of such dividend, distribution, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up.

 

Section 15.12                          Holder
Not Deemed a Shareholder

 

Except as otherwise
specifically provided herein, prior to a Noteholder’s receipt of Common Stock
upon conversion of a Note, the Noteholder shall not be entitled, as such, to
any rights of a shareholder of the Company, including, without limitation, the
right to vote or to consent to any action of the shareholders of the Company,
to receive dividends or other distributions, to exercise any preemptive right
or to receive dividends or other distributions, or to receive any notice of
meetings of shareholders of the Company, and shall not be entitled to receive
any notice of any proceedings of the Company. 
In addition, nothing contained in this Indenture shall be construed as
imposing any liabilities on such holder to purchase any securities (upon
conversion of a Note or otherwise) or as a shareholder of the Company, whether
such liabilities are asserted by the Company or by creditors of the Company.

 

Section 15.13                          Adjustment
to Conversion Price Following Certain Changes of Control 

 

In case (a) a Change of
Control occurs as defined in clause (iii) of the definition thereof
(disregarding, for purposes of this Section 15.13, the proviso at the end of
such definition), (b) 10% or more of the consideration received by holders of
the Common Stock in connection with such Change of Control consists of cash or
securities or other property that is not traded or scheduled to be traded
immediately following such transaction on a U.S. national securities exchange
or the Nasdaq National Market and (c) a holder elects to convert its Notes,
pursuant to this Article XV, on or prior to February 15, 2008, the Conversion
Price for any such Notes surrendered for conversion shall be increased by a
number of additional shares of Common Stock (the “Additional Shares”) as
described below.

 

The number of Additional
Shares will be determined by reference to the table attached as Schedule A
hereto, based on the effective date of such Change in Control (the “Effective
Date”) and the price (the “Stock Price”) paid per share of the Common Stock in
such corporate transaction. If holders of Common Stock receive only cash in
such corporate transaction, the Stock Price shall be the cash amount paid per
share. Otherwise, the Stock Price shall be the average of the Closing Prices of
Common Stock on the five Trading Days up to but not including the Effective
Date of the Change in Control.

 

The Stock Prices set
forth in the first row of the table in Schedule A hereto will be adjusted as of
any date on which the Conversion Price of the Securities is adjusted pursuant
to Section 15.6. The adjusted Stock Price will equal the Stock Price applicable
immediately prior to such adjustment, multiplied by a fraction, the numerator
of which is the Conversion Price as so adjusted and the denominator of which is
the Conversion Price immediately prior to such adjustment giving rise to the
Stock Price adjustment. If an adjustment is made to the Conversion 

 

86

 

Price pursuant to
Section 15.6, the number of Additional Shares will be adjusted by multiplying
such amount by a fraction, the numerator of which is the Conversion Price
immediately prior to such adjustment and the denominator of which is the
Conversion Price as so adjusted.

 

The exact Stock Prices
and Effective Dates may not be set forth in the table in Schedule A, in which
case:

 

(i)                                     if
the Stock Price is between two Stock Price amounts in the table or the
Effective Date is between two Effective Dates in the table, the number of
Additional Shares will be determined by a straight-line interpolation between
the number of Additional Shares set forth for the higher and lower Stock Price
amounts and the two dates, as applicable, based on a 365-day year,

 

(ii)                                  if
the Stock Price is equal to or in excess of $100.00 per share, subject to
adjustments set forth in Section 15.6, no Additional Shares will be issued upon
conversion, and

 

(iii)                               if the Stock Price is less than $18.50 per share, subject to
adjustments set forth in Section 15.6, no Additional Shares will be issued upon
conversion.

 

Section 15.14                          Payment
of Additional Conversion Payment and Company Conversion Provisional Payment.

 

The Company may pay any
Company Conversion Provisional Payment required to be paid pursuant to this
Indenture in whole or in part in cash and/or through the issuance of Common
Stock; provided (i) that Common Stock used to pay any such payment shall
be valued at ninety-five percent (95%) of the average Closing Price of the
Common Stock for each of the five Trading Days immediately preceding the second
Trading Day prior to the Conversion Date, (ii) that a registration
statement covering the resale of such Common Stock is effective and available
for resale of such Common Stock from the twenty-fifth (25th) Trading Date prior
to the Conversion Date to and including the Conversion Date to the extent
required under the Registration Rights Agreement and (iii) such Common
Stock is listed for trading on the Principal Market (as defined in the Securities
Purchase Agreement).

 

ARTICLE XVI

 

REPURCHASE RIGHT

 

Section 16.1                                Repurchase
Right 

 

If, at any time prior to
February 15, 2025 there shall occur a Repurchase Event (as defined in Section
16.3), then each holder shall have the right, at such holder’s option, to
require the Company to repurchase all of such holder’s Notes, or any portion
thereof (in principal amounts of One Thousand United States Dollars ($1,000) or
integral multiples thereof), on the date (a “Repurchase Date”) that is forty
(40) calendar days after the date of the Company Notice (as defined in Section
16.2(a) below) of such Repurchase Event (or, if such 40th day is not a Business
Day, the next succeeding Business Day). 
Such repurchase shall be made in cash at a 

 

87

 

price
equal to 100% of the principal amount of Notes such holder elects to require
the Company to repurchase together, in each case, with accrued interest, if
any, to the applicable Repurchase Date (the “Repurchase Price”).

 

In addition, Notes shall
be purchased by the Company at the option of the holder on February 15, 2010,
February 15, 2015 and February 15, 2020 (each, also a “Repurchase Date”), at
the Repurchase Price.

 

Notwithstanding anything
in this Article XVI to the contrary, if a redemption date pursuant to Article
III shall occur prior to any Repurchase Date established pursuant to a Company
Notice under Section 16.2, provided that the Company shall have deposited or
set aside an amount of money sufficient to redeem such Notes as set forth in
Section 3.2 on or before such Repurchase Date, all such Notes shall be redeemed
pursuant to Article III and the repurchase rights hereunder shall have no
effect.

 

Section 16.2                                Notices;
Method of Exercising Repurchase Right, Etc.

 

(a)                                  Unless
the Company shall have theretofore called for redemption all of the outstanding
Notes and deposited or set aside an amount of money sufficient to redeem such
Notes on the redemption date as set forth in Section 3.2, on or before (x) the
tenth (10th) calendar day following the occurrence of a Repurchase Event and
(y) January 1, 2010, January 1, 2015 and January 1, 2020, the Company or, at
the written request of the Company, the Trustee, shall send to all holders of
record of the Notes a notice (the “Company Notice”) in the form as prepared by
the Company of the repurchase right set forth herein arising as of the result
of the occurrence of a Repurchase Event or on February 15, 2010, February 15,
2015 or February 15, 2020, as applicable. 
The Company shall also deliver a copy of such notice to the
Trustee.  The Company Notice shall
contain the following information:

 

(1)                                  a brief description of the Repurchase Event, if applicable;

 

(2)                                  the Repurchase Date;

 

(3)                                  the CUSIP number(s) of the Note(s) subject to the repurchase
right;

 

(4)                                  the date by which the repurchase right must be exercised;

 

(5)                                  the last date by which the election to require repurchase,
if submitted, must be revoked;

 

(6)                                  the Repurchase Price;

 

(7)                                  a description of the procedure which a holder must follow to
exercise a repurchase right

 

(8)                                  the Additional Shares, if any, to be issued pursuant to
Section 15.13; and

 

88

 

(9)                                  the Conversion Price then in effect, the date on which the right
to convert the principal amount of the Notes to be repurchased will terminate
and the place or places where Notes may be surrendered for conversion.

 

No failure of the Company
to give the foregoing notices or defect therein shall limit any holder’s right
to exercise a repurchase right or affect the validity of the proceedings for
the repurchase of Notes.

 

If any of the foregoing
provisions are inconsistent with applicable law, such law shall govern.

 

(b)                                 To
exercise a repurchase right, a holder shall deliver to the Trustee on or before
the close of business on the thirty-fifth (35th) day after the Company Notice
was sent (i) written notice to the Company (or agent designated by the
Company for such purpose) of the holder’s exercise of such right in substantially
the form attached hereto as Exhibit C (the “Repurchase Notice”), which
Repurchase Notice shall set forth the name of the holder, the principal amount
of the Notes to be repurchased, a statement that an election to exercise the
repurchase right is being made thereby, and (ii) the Notes with respect to
which the repurchase right is being exercised, duly endorsed for transfer to
the Company.  Election of repurchase by a
holder shall be revocable at any time prior to, but excluding, the Repurchase
Date, by delivering written notice to that effect to the Trustee prior to the
close of business on the Business Day prior to the Repurchase Date.

 

(c)                                  If
the Company fails to repurchase on the Repurchase Date any Notes (or portions
thereof) as to which the repurchase right has been properly exercised, then the
principal of such Notes shall, until paid, bear interest to the extent
permitted by applicable law from the Repurchase Date at the rate borne by the
Note and each such Note shall be convertible into Common Stock in accordance
with this Indenture (without giving effect to Section 16.2(b)) until the
principal of such Note shall have been paid or duly provided for.

 

(d)                                 Any
Note that is to be repurchased only in part shall be surrendered to the Trustee
duly endorsed for transfer to the Company and accompanied by appropriate
evidence of genuineness and authority satisfactory to the Company and the
Trustee duly executed by, the holder thereof (or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the holder of such Note without service charge, a new Note or
Notes, containing identical terms and conditions, of any authorized
denomination as requested by such holder in aggregate principal amount equal to
and in exchange for the unrepurchased portion of the principal of the Note so
surrendered.

 

(e)                                  On
or prior to 1:00 p.m., New York City time on the Repurchase Date, the Company
shall deposit with the Trustee or with a paying agent (or, if the Company is
acting as its own paying agent, segregate and hold in trust as provided in
Section 5.4) the Repurchase Price in cash for payment to the holder on the
Repurchase Date.

 

89

 

(f)                                    If
the Company is unable to repurchase on the Repurchase Date all of the Notes (or
portions thereof) as to which the repurchase right has been properly exercised,
the aggregate amount of Notes the Company may repurchase shall be allocated pro rata among each Note (or portion thereof) surrendered
for repurchase, based on the principal amount of such Note, in proportion to
the aggregate amount of Notes surrendered for repurchase.

 

(g)                                 All
Notes delivered for repurchase shall be delivered to the Trustee to be canceled
in accordance with the provisions of Section 2.8.

 

Section 16.3                                Certain
Definitions

 

For purposes of this
Article XVI:

 

(a)                                  The
term “beneficial owner” shall be determined in accordance with Rule 13d-3
and 13d-5, as in effect on the date of the original execution of this
Indenture, promulgated by the Commission pursuant to the Exchange Act.

 

(b)                                 The
term “person” or “group” shall include any syndicate or group which would be
deemed to be a “person” under Section 13(e) and 14(d) of the Exchange
Act as in effect on the date of the original execution of this Indenture.

 

(c)                                  The
term “Continuing Director” means at any date a member of the Company’s Board of
Directors (i) who was a member of such board on the date of the Securities
Purchase Agreement 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 to 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 or such lesser
number comprising a majority of a nominating committee if authority for such
nominations or elections has been delegated to a nominating committee whose
authority and composition have been approved by at least a majority of the
directors who were Continuing Directors at the time such committee was
formed.  (Under this definition, if the
Board of Directors of the Company as of the date of this Indenture were to
approve a new director or directors and then resign, no Change in Control would
occur even though all of the current members of the Board of Directors would
thereafter cease to be in office).

 

(d)                                 The
term “Repurchase Event” means a Change in Control or a Termination of Trading.

 

(e)                                  A
“Change in Control” shall be deemed to have occurred when (i) any “person”
or “group” (as such terms are used in Sections 13(e) and 14(d) of the
Exchange Act) is or becomes the beneficial owner of shares representing more
than 50% of the combined voting power of the then outstanding securities
entitled to vote generally in elections of directors of the Company (the “Voting
Stock”); (ii)  approval by the shareholders of the Company of any plan or
proposal for the liquidation, dissolution or winding up of the Company;
(iii) the Company (A) consolidates with or merges into any 

 

90

 

other corporation or any other corporation merges into
the Company, and in the case of any such transaction, the outstanding Common
Stock of the Company is changed or exchanged into other assets or securities as
a result, unless the shareholders of the Company immediately before such
transaction own, directly or indirectly immediately following such transaction,
at least a majority of the combined voting power of the outstanding voting
securities of the corporation resulting from such transaction in substantially
the same proportion as their ownership of the Voting Stock immediately before
such transaction, or (B) conveys, transfers or leases all or substantially
all of its assets to any Person (other than a wholly-owned subsidiary as a
result of which the Company becomes a holding company); or (iv) any time
Continuing Directors do not constitute a majority of the Board of Directors of
the Company (or, if applicable, a successor corporation to the Company);
provided that a Change in Control shall not be deemed to have occurred if at
least ninety percent (90%) of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions constituting the Change
in Control consists of (and the capital stock into which the Notes would be
convertible consists of) shares of capital stock that are, or upon issuance
will be, traded on a United States national securities exchange or approved for
trading on an established automated over-the-counter trading market in the
United States and as a result of such merger or consolidation the Notes become
convertible into such publicly traded securities, excluding cash payments for
fractional shares.

 

(f)                                    A
“Termination of Trading” shall have occurred if the Common Stock of the
Company shall not be authorized for
quotation or listing on The New York Stock Exchange, Inc. (the “NYSE”), the
American Stock Exchange, Inc. (“AMEX”) or The Nasdaq
National Market (“NASDAQ”).

 

ARTICLE XVII

 

MISCELLANEOUS PROVISIONS

 

Section 17.1                                Provisions
Binding on Company’s Successors

 

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

 

Section 17.2                                Official
Acts by Successor Corporation

 

Any act or proceeding by
any provision of this Indenture authorized or required to be done or performed
by any board, committee or officer of the Company shall and may be done and
performed with like force and effect by the like board, committee or officer of
any corporation that shall at the time be the lawful sole successor of the
Company.

 

91

 

Section 17.3                                Addresses
for Notices, Etc.

 

Any notice or
demand which by any provision of this Indenture is required or permitted to be
given or served by the Trustee or by the holders of Notes on the Company and
any notice, direction, request or demand hereunder to or upon the Trustee or to
or upon any Noteholder shall be deemed to have been sufficiently given or made,
for all purposes (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (evidence by mechanically or electronically
generated receipt by the sender’s facsimile machine); (iii) one
(1) Business Day after deposit with a nationally recognized overnight
delivery service; or (iv) three (3) Business Days after deposit in the United
States mail, with first-class postage pre-paid, mailed by registered or
certified mail; in each case properly addressed to the party to receive the
same.  The addresses and facsimile
numbers of such communications shall be:

 

If to the Company:

 

Quixote
Corporation

35 East Wacker
Drive

Chicago, Illinois
60601

Telephone:   (312)
467-6755

Facsimile:    (312)
467-0197

Attention:    Leslie
J. Jezuit

Chief Executive Officer

 

If to the Trustee:

 

LaSalle Bank
National Association

135 S. LaSalle
Street

Suite 1960

Chicago, Illinois
60603

Telephone:  (312) 904-2442

Facsimile:   (312)
904-2236

Attention:   Corporate Trust Administration

Wayne M. Evans, First
Vice President

 

If to a Noteholder:

 

At the address and
facsimile number of such Noteholder, as set forth on the Note Register, which shall initially include the information set forth in the
Securities Purchase Agreement regarding notices.

 

The Trustee, by notice to
the Company, may designate additional or different addresses for subsequent
notices or communications.  The Trustee
shall use reasonable commercial efforts to provide any notice of default,
notice of redemption and notice of conversion to each holder by facsimile, if
and to the extent such holder’s facsimile number is set forth in the Note
Register.

 

92

 

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

 

Section 17.4                                Governing
Law; Jurisdiction; Jury Trial

 

This Indenture and each
Note shall be deemed to be a contract made under the laws of the State of New
York and for all purposes shall be construed in accordance with the internal
laws of the State of New York without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York.  Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the state
and federal courts sitting in New York City, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Indenture and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.  If any provision of
this Indenture shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Indenture in that jurisdiction or the validity or
enforceability of any provision of this Indenture in any other
jurisdiction.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

Section 17.5                                Evidence
of Compliance with Conditions Precedent; Certificates to Trustee

 

Upon any application or
demand by the Company to the Trustee to take any action under any of the
provisions of this Indenture, the Company shall furnish to the Trustee an
Officer’s Certificate stating that in the opinion of the person executing such
Officer’s Certificate all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been satisfied, and an Opinion
of Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been satisfied.

 

Each certificate or
opinion provided for by or on behalf of the Company in this Indenture and
delivered to the Trustee with respect to compliance with a condition or
covenant provided for in this Indenture shall include (1) a statement that
the person making such certificate or opinion has read such covenant or
condition; (2) a brief statement as to the nature and scope of 

 

93

 

the examination or
investigation upon which the statement or opinion contained in such certificate
or opinion is based; (3) a statement that, in the opinion of such person,
he has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not, in the
opinion of such person, such condition or covenant has been satisfied or
waived.

 

Section 17.6                                Legal
Holidays

 

In any case where the
date of maturity of interest on or principal of the Notes or the date fixed for
redemption of any Note will not be a Business Day, then payment of such
interest on or principal of the Notes need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the date of maturity or the date fixed for redemption, and no interest
shall accrue for the period from and after such date.

 

Section 17.7                                Trust
Indenture Act

 

This Indenture is hereby
made subject to, and shall be governed by, the provisions of the Trust
Indenture Act required to be part of and to govern indentures qualified under
the Trust Indenture Act; provided, however, that this
Section 17.7 shall not require that this Indenture or the Trustee be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act, nor shall it
constitute any admission or acknowledgment by any party hereto that any such
qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act.  If any provision hereof limits, qualifies or
conflicts with another provision hereof that is required to be included in an
indenture qualified under the Trust Indenture Act, such required provision shall
control.

 

Section 17.8                                Benefits
of Indenture

 

Nothing in this Indenture
or in the Notes, expressed or implied, shall give to any Person, other than the
parties hereto, any paying agent, any authenticating agent, any Note Registrar
and their successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim
under this Indenture.

 

Section 17.9                                Table
of Contents, Headings, Etc.

 

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

 

Section 17.10                          Authenticating
Agent

 

The Trustee may appoint
an authenticating agent which shall be authorized to act on its behalf and
subject to its direction in the authentication and delivery of Notes in
connection with the original issuance thereof and transfers and exchanges of
Notes hereunder, including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3,
as fully for all intents and purposes as though the authenticating agent had
been expressly authorized by this Indenture and those Sections to 

 

94

 

authenticate
and deliver Notes.  For all purposes of
this Indenture, the authentication and delivery of Notes by the authenticating
agent shall be deemed to be authentication and delivery of such Notes “by the
Trustee” and a certificate of authentication executed on behalf of the Trustee
by an authenticating agent shall be deemed to satisfy any requirement hereunder
or in the Notes for the Trustee’s certificate of authentication.  Such authenticating agent shall at all times
be a Person eligible to serve as trustee hereunder pursuant to
Section 8.9.

 

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

 

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

 

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

 

The provisions of
Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.10 shall be
applicable to any authenticating agent.

 

Section 17.11                          Execution
in Counterparts

 

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

 

Section 17.12                          No
Adverse Interpretation of Other Agreements

 

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

 

95

 

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

 

	
   

  	
  QUIXOTE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/Daniel P. Gorey

  	
   

  
	
   

  	
   

  	
  Name: Daniel P. Gorey

  
	
   

  	
   

  	
  Title: Vice President, Chief Financial

  Officer and Treasurer

  

 

	
  Attest:

  	
   

  
	
   

  	
   

  
	
  /s/ Joan R.
  Riley

  	
   

  	
   

  
	
  Name: Joan R.
  Riley

  	
   

  
	
  Title: Vice
  President and General Counsel

  	
   

  
			

 

	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION

  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wayne M. Evans

  	
   

  
	
   

  	
   

  	
  Name: Wayne M. Evans

  
	
   

  	
   

  	
  Title: First Vice President

  

 

 

[SIGNATURE PAGE TO INDENTURE]

 

 

SCHEDULE A

 

The following table sets
forth the number of Additional Shares to be received per $1,000 principal
amount of Notes.

 

	
   

  	
   

  	
  Stock
  Price

  	
   

  
	
  Effective Date

  	
   

  	
  $

  	
  18.5

  	
   

  	
  $

  	
  20.00

  	
   

  	
  $

  	
  22.50

  	
   

  	
  $

  	
  25.00

  	
   

  	
  $

  	
  27.50

  	
   

  	
  $

  	
  30.00

  	
   

  	
  $

  	
  32.50

  	
   

  	
  $

  	
  35.00

  	
   

  	
  $

  	
  37.50

  	
   

  	
  $

  	
  40.00

  	
   

  	
  $

  	
  50.00

  	
   

  	
  $

  	
  60.00

  	
   

  	
  $

  	
  70.00

  	
   

  	
  $

  	
  80.00

  	
   

  	
  $

  	
  90.00

  	
   

  	
  $

  	
  100.00

  	
   

  
	
  2/9/2005

  	
   

  	
  15.4

  	
   

  	
  14.0

  	
   

  	
  12.0

  	
   

  	
  10.5

  	
   

  	
  9.2

  	
   

  	
  8.1

  	
   

  	
  7.2

  	
   

  	
  6.4

  	
   

  	
  5.7

  	
   

  	
  5.3

  	
   

  	
  4.2

  	
   

  	
  3.5

  	
   

  	
  3.0

  	
   

  	
  2.6

  	
   

  	
  2.3

  	
   

  	
  2.1

  	
   

  
	
  2/15/2006

  	
   

  	
  15.4

  	
   

  	
  13.7

  	
   

  	
  11.4

  	
   

  	
  9.6

  	
   

  	
  8.0

  	
   

  	
  6.8

  	
   

  	
  5.7

  	
   

  	
  4.8

  	
   

  	
  4.0

  	
   

  	
  3.5

  	
   

  	
  2.8

  	
   

  	
  2.3

  	
   

  	
  2.0

  	
   

  	
  1.8

  	
   

  	
  1.6

  	
   

  	
  1.4

  	
   

  
	
  2/15/2007

  	
   

  	
  15.4

  	
   

  	
  13.5

  	
   

  	
  10.8

  	
   

  	
  8.7

  	
   

  	
  6.9

  	
   

  	
  5.5

  	
   

  	
  4.2

  	
   

  	
  3.2

  	
   

  	
  2.2

  	
   

  	
  1.8

  	
   

  	
  1.4

  	
   

  	
  1.2

  	
   

  	
  1.0

  	
   

  	
  0.9

  	
   

  	
  0.8

  	
   

  	
  0.7

  	
   

  
	
  2/15/2008

  	
   

  	
  15.4

  	
   

  	
  13.2

  	
   

  	
  10.2

  	
   

  	
  7.8

  	
   

  	
  5.8

  	
   

  	
  4.1

  	
   

  	
  2.7

  	
   

  	
  1.5

  	
   

  	
  0.5

  	
   

  	
  0.0

  	
   

  	
  0.0

  	
   

  	
  0.0

  	
   

  	
  0.0

  	
   

  	
  0.0

  	
   

  	
  0.0

  	
   

  	
  0.0

  	
   

  
																																																		

 

 

EXHIBIT A

 

FORM OF 7% CONVERTIBLE SENIOR SUBORDINATED NOTE DUE
2025

 

 

QUIXOTE CORPORATION

 

[FORM OF FACE OF NOTE]

 

[THE FOLLOWING PARAGRAPH
SHALL APPEAR ON THE FACE OF EACH RESTRICTED NOTE.]

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES
LAWS.  THIS SECURITY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM.  THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS SECURITY.

 

[THE COMPANY MAY, BUT IS
NOT OBLIGATED TO, INSTRUCT THE TRUSTEE TO PLACE THE FOLLOWING PARAGRAPH ON THE
FACE OF EACH NOTE HELD BY OR TRANSFERRED TO AN “AFFILIATE” (AS DEFINED IN RULE
501(B) OF REGULATION D UNDER THE SECURITIES ACT) OF THE COMPANY:]

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN
AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY
IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT.  THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY THE SECURITIES.

 

[THE FOLLOWING PARAGRAPH
SHALL APPEAR ON THE FACE OF EACH GLOBAL NOTE.]

 

A-2

 

THIS GLOBAL NOTE IS HELD
BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.5(b) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.8 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

 

THIS CONVERTIBLE SENIOR
SUBORDINATED NOTE DUE 2025 (THE “NOTE”) AND ANY AND ALL PAYMENTS HEREUNDER ARE
SUBORDINATED PURSUANT TO THE TERMS OF ARTICLE IV OF THAT INDENTURE, DATED AS OF
FEBRUARY 9, 2005, BETWEEN THE COMPANY, AS ISSUER, AND LASALLE BANK NATIONAL
ASSOCIATION, AS TRUSTEE (THE “INDENTURE”). 
ALL PAYMENTS OF INDEBTEDNESS EVIDENCED BY THIS NOTE, INCLUDING, WITHOUT
LIMITATION, PAYMENTS OF THE PRINCIPAL, INTEREST, THE CONVERSION PRICE, THE
COMPANY CONVERSION PROVISIONAL PAYMENT, ANY REDEMPTION PRICE, THE REPURCHASE
PRICE, LIQUIDATED DAMAGES, FEES, EXPENSES AND ALL OTHER AMOUNTS DUE THEREUNDER
ARE SUBORDINATED TO PAYMENT OF THE SENIOR INDEBTEDNESS AS DEFINED IN SECTION
4.1 OF THE INDENTURE, INCLUDING, WITHOUT LIMITATION, ALL SENIOR FACILITY INDEBTEDNESS
NOW OR HEREAFTER OWING BY THE COMPANY TO THE NORTHERN TRUST COMPANY, AS
ADMINISTRATIVE AGENT, FOR THE BENEFIT OF LENDERS (THE “AGENT”), AND THE LENDERS
AS PARTIES TO THAT CERTAIN CREDIT AGREEMENT, DATED AS OF MAY 16, 2003, AS
AMENDED, AMONG THE COMPANY, THE AGENT AND SUCH LENDERS.

 

QUIXOTE CORPORATION

 

7% Convertible Senior Subordinated Note due 2025

 

	
  No.
              

  	
  $                             

  
	
   

  	
   

  
	
  CUSIP No.
  [                            ]

  	
   

  

 

A-3

 

Quixote Corporation, a
corporation duly organized and validly existing under the laws of the State of
Delaware (herein called the “Company”, which term includes any successor
corporation under the Indenture referred to on the reverse hereof), for value received
hereby promises to pay to
                                        ,
or registered assigns, the principal sum of
                   
United States Dollars on February 15, 2025 and to pay interest on said
principal sum semi-annually on February 15 and August 15 of each year (each, an
“Interest Payment Date”), commencing August 15, 2005, at the rate per annum
specified in the title of this Note, accrued from February 9, 2005.  The interest so payable on any February 15 or
August 15 will be paid to the person in whose name this Note, or portion
thereof (or one or more Predecessor Notes) is registered at the close of
business on the record date, which shall be the 4th day of the month in which
the Interest Payment Date shall occur, whether or not such date is a Business
Day; provided that any such interest not punctually paid or duly provided for
shall be payable as provided in the Indenture. 
Payment of the principal of and interest accrued on this Note (including
Liquidated Damages, if any) shall be made at the office or agency of the
Company maintained for that purpose, which shall be the Corporate Trust Office
of the Trustee, or at any other office or agency permitted by the Indenture, in
such lawful money of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts; provided
further, however, that, with respect to any holder of Notes with an aggregate
principal amount equal to or in excess of Five Hundred Thousand United States
Dollars ($500,000), interest on such holder’s Notes shall be paid by wire
transfer in immediately available funds in accordance with the written wire
transfer instruction supplied by such holder from time to time to the Trustee
and paying agent (if different from the Trustee) at least five (5) Business
Days prior to the applicable record date.

 

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

 

This Note shall be deemed
to be a contract made under the laws of the State of New York, and for all
purposes shall be construed in accordance with and governed by the laws of said
State.

 

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

 

A-4

 

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

 

 

	
   

  	
  QUIXOTE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Name, Title]

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [Name, Title]

  	
   

  
				

 

 

	
  TRUSTEE’S CERTIFICATE
  OF AUTHENTICATION

  	
   

  
	
   

  	
   

  
	
  LASALLE BANK NATIONAL
  ASSOCIATION,

  	
   

  
	
   

  	
   

  
	
  as Trustee, certifies that
  this is one of the Notes described

  	
   

  
	
   

  	
   

  
	
  in
  the within-named Indenture.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Authorized
  Signatory

  	
   

  
				

 

A-5

 

[FORM OF REVERSE OF NOTE]

 

QUIXOTE CORPORATION

 

7% Convertible Senior Subordinated Note due 2025

 

This Note is one of a
duly authorized issue of Notes of the Company, designated as its 7% Convertible
Senior Subordinated Notes due 2025 (herein called the “Notes”), initially
limited to the aggregate principal amount of Forty Million United States
Dollars ($40,000,000), all issued or to be issued under and pursuant to an
Indenture dated as of February 9, 2005 (herein called the “Indenture”), between
the Company and LaSalle Bank National Association (herein called the
“Trustee”), to which the Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Notes. 
Additional Notes may be issued in an unlimited aggregate principal
amount, subject to certain conditions specified in the Indenture. All
capitalized terms used herein without definition shall have the meaning set
forth in the Indenture.

 

In case an Event of
Default, as defined in the Indenture, shall have occurred and be continuing,
the principal of, premium, if any, and accrued interest on all Notes may be
declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.  Liquidated damages paid
pursuant to Section 15.2 of the Indenture, if any, shall be paid within ten
(10) Business Days of the date from which such liquidated damages accrued
pursuant to Section 15.2.  Liquidated
Damages on the Notes paid pursuant to Section 2(f) of the Registration Rights
Agreement, if any, shall be paid at the times and in the manner provided
therein.

 

The Indenture contains
provisions permitting the Company and the Trustee in certain limited circumstances,
without the consent of the holders of the Notes, and in other circumstances,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, evidenced as in the
Indenture provided, to execute amendments to the Indenture or supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or
modifying in any manner the rights of the holders of the Notes; provided,
however, that no such amendment or supplemental indenture shall (i) extend
the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption or repurchase
thereof, impair, or change in any respect adverse to the holder of Notes, the
obligation of the Company to repurchase any Note at the option of the holder in
accordance with Article XVI of the Indenture, or impair or adversely affect the
right of any Noteholder to institute suit for the payment thereof, or change
the currency in which the Notes are payable, or impair or change in any respect
adverse to the Noteholders the right to convert the Notes into Common Stock
subject to the terms set forth herein, including Section 15.7, without the
consent of the holder of each Note so affected, or (ii) reduce the
aforesaid percentage of Notes,

 

A-6

 

the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Notes then outstanding.

 

It is also provided in
the Indenture that the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under
the Indenture and its consequences except (i) a default in the payment of
interest or premium, if any, on, or the principal of, the Notes when due, (ii)
a failure by the Company to convert any Notes into Common Stock or (iii) a
default in respect of a covenant or provisions of the Indenture which under
Article XI thereof cannot be modified or amended without the consent of the
holders of all Notes then outstanding. 
Any such consent or waiver by a holder of this Note (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such holder and
upon all future holders and owners of this Note and any Notes which may be
issued in exchange or substitution hereof, irrespective of whether any notation
thereof is made upon this Note or such other Notes.

 

The payment of principal
of, premium, if any, and interest on the Notes will be subordinated in right of
payment to the prior payment in full of Senior Indebtedness as set forth in
Article IV of the Indenture.

 

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

 

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

 

From and after February
20, 2008, except as provided in Section 3.1 of the Indenture, the Company may,
at its option, redeem all or any part of the Notes, upon notice as set forth in
the Indenture, and the Company shall pay each holder of Notes redeemed a
redemption price equal to the principal amount of such Notes, plus accrued and
unpaid interest thereon, if any, to, but excluding, the date of redemption.

 

If such notice of
redemption has been given as provided in the Indenture, the Notes or portion of
Notes called for redemption shall, unless converted into Common Stock pursuant
to the terms of the Indenture, become due and payable on the date and at the
place or places stated in such notice at the applicable redemption price and
interest accrued to, but excluding, the date fixed for redemption, and on and
after such date (unless the Company shall default in the payment of such Notes
at the redemption price and interest accrued to, but excluding, said date)
interest on the Notes or portion of Notes so called for redemption shall cease
to accrue and such Notes shall cease after the close of business on the
Business Day next preceding the date fixed for redemption to be convertible
into Common Stock and, except as provided in Sections 8.5 and 13.4 of the
Indenture, to be entitled to any benefit or security under the Indenture, and
the holders of such Notes shall have no 

 

A-7

 

right
in respect of such Notes except the right to receive the redemption price and
unpaid interest to, but excluding, the date fixed for redemption.  On presentation and surrender of such Notes
at a place of payment specified in such notice, such Notes or the specified
portions thereof to be redeemed shall be paid and redeemed by the Company at
the applicable redemption price and interest accrued thereon to, but excluding,
the date fixed for redemption; provided that, if the applicable redemption date
is an Interest Payment Date, then the semi-annual payment of interest becoming
due on such date shall be payable to the holders of such Notes registered as
such on the relevant record date subject to the terms and provisions of Section
2.3 of the Indenture.

 

The Notes are not subject
to redemption through the operation of any sinking fund.

 

Upon the occurrence of a
“Repurchase Event,” the Noteholder has the right, at such holder’s option, to
require the Company to repurchase all or any portion of such holder’s Notes or
any portion thereof (in the principal amounts of One Thousand United States
Dollars ($1,000) or integral multiples thereof) on the 40th calendar day (or,
if such 40th day is not a Business Day, the next succeeding Business Day) after
notice of such Repurchase Event at a price equal to 100% of the principal
amount of the Notes such holder elects to require the Company plus accrued
interest to the date fixed for repurchase (the ‘Repurchase Price”); provided
that if such Repurchase Date is an Interest Payment Date, then the semi-annual
payment of interest becoming due on such date shall be payable to the holders
of such Notes registered as such on the relevant record date subject to the
terms and provisions of Section 2.3 of the Indenture.  Notes shall be purchased by the Company at
the option of the holder on February 15, 2010, February 15, 2015 and February
15, 2020 (each, also a “Repurchase Date”), at the Repurchase Price. If a
redemption date pursuant to Article III of the Indenture shall occur prior to
any Repurchase Date established pursuant to a Company Notice under Section 16.2
of the Indenture, provided that the Company shall have deposited or set aside
an amount of money sufficient to redeem such Notes as set forth in Section 3.2
of the Indenture on or before such Repurchase Date, all such Notes shall be
redeemed pursuant to Article III of the Indenture and the repurchase rights
under Article XVI of the Indenture shall have no effect.

 

Subject to the provisions
of the Indenture, the holder hereof has the right, at its option, at any time
following the date of original issuance of the Notes and prior to the close of
business on February 15, 2025 (except that, with respect to any Note or portion
of a Note that shall be called for redemption, such right shall terminate,
except as otherwise provided in the Indenture, at the close of business on the
Business Day next preceding the date fixed for redemption unless the Company
shall default in payment due upon redemption), to convert the principal hereof
or any portion of such principal which is One Thousand United States Dollars
($1,000) or an integral multiple thereof, into that number of fully paid and
non-assessable shares of the Company’s Common Stock, as said shares shall be
constituted at the date of conversion, obtained by dividing the principal
amount of this Note or portion thereof to be converted by the conversion price
of $25.90 or such conversion price as adjusted from time to time as provided in
the Indenture, upon surrender of this Note, together with a conversion notice
as provided in the Indenture and this Note, to the Company at the office or
agency of the Company maintained for that purpose, which shall be the Corporate
Trust Office of the Trustee, or at any other office or agency permitted by the
Indenture, and, unless the shares issuable on conversion are to be issued in
the same name as this Note, duly endorsed by, or accompanied by instruments of
transfer in form satisfactory to the Company duly executed by, the holder or by
his duly authorized attorney.  The
Company shall pay in cash, on this Note or portion thereof 

 

A-8

 

surrendered
for conversion during the period from the close of business on any Interest
Payment Date to which interest has been fully paid through the close of
business on the Business Day preceding the record date for the next such
Interest Payment Date, accrued and unpaid interest, if any, to, but excluding,
the date of conversion.  Any such payment
of interest shall be made with ten (10) Business Days after the Conversion
Date.  Notwithstanding the foregoing, if
this Note shall be surrendered for conversion during the period from the close
of business on any record date for any Interest Payment Date through the close
of business on the Business Day next preceding such Interest Payment Date, the
holder (unless the Note or the portion thereof being converted shall have been
called for redemption pursuant to a redemption notice sent to the Noteholders
in accordance with Section 3.2 of the Indenture or shall have become due prior
to such Interest Payment Date as a result of exercise of the repurchase right
set forth in Article XVI of the Indenture) must, at the time of conversion of
the Note, pay by wire transfer of immediately available funds or other funds
acceptable to the Company, an amount equal to the interest otherwise payable on
such Interest Payment Date on the principal amount being converted; provided,
however, that no such payment need be made if there shall exist at the time of
conversion a default in the payment of interest on the Notes.  No fractional shares of Common Stock will be
issued upon any conversion, but an adjustment in cash will be paid to the
holder, as provided in the Indenture, in respect of any fraction of a share
which would otherwise be issuable upon the surrender of any Note or Notes for
conversion.

 

The Company may, at its
option, subject to stisfaction of certain conditions set forth in Section 15.3
of the Indenture, automatically convert all or a portion of the Notes (an
“Automatic Conversion”) at any time prior to February 15, 2025
if the Closing Price (as defined in the Indenture) per share of the Common
Stock has exceeded one hundred and fifty percent (150%) of the Conversion Price
then in effect for at least twenty (20) Trading Days within a period of thirty
(30) consecutive Trading Days ending within the thirty (30) Trading Days  prior to the date the Company gives to all
holders of Notes a notice specifying the date on which an Automatic Conversion
will become effective.  If the effective
date of an Automatic Conversion is prior to February 15, 2008,
the Company shall make an additional payment in cash or, under certain
circumstances, in shares of Common Stock, to each holder of Notes with respect
to the Notes converted, in an amount equal to $210 per
each One Thousand United States Dollars ($1,000) principal amount of the Note
(the “Company Conversion Provisional Payment”), less the amount of any interest
actually paid on the portion of the principal amount of the Note to be
converted prior to the effective date of the Automatic Conversion (and, if the
Note is converted between a record date and the next Interest Payment Date,
less interest payable on each One Thousand United States Dollars ($1,000)
principal amount of the Note on such next Interest Payment Date). Common Stock
used to pay any Company Conversion Provisional Payment shall be valued at
ninety-five percent (95%) of the average Closing Price of the Common Stock for
each of the five Trading Days immediately preceding the second Trading Day
prior to the Conversion Date.

 

Unless the Company shall
have theretofore called for redemption all of the Notes then outstanding, if
the Company elects to convert all or a portion of the Notes pursuant to its
Automatic Conversion right, the Company, or at its request (which must be
received by the Trustee at least five (5) Business Days prior to the date the
Trustee is requested to give notice as described below unless a shorter period
is agreed to by the Trustee), the Trustee in the name of and at the expense of
the Company, shall send or cause to be sent a notice of the Automatic
Conversion not more than thirty 

 

A-9

 

(30) days
but not less than five (5) days before the date of effectiveness of the
Automatic Conversion as set forth in the Indenture.  In case the Notes are to be converted in part
only, the notice shall state the portion of the principal amount thereof to be
converted and shall state that on and after the effective date of the Automatic
Conversion, upon surrender of such Note, a new Note or Notes in principal
amount equal to the unconverted portion thereof will be issued.

 

In connection with any
redemption of Notes, the Company may arrange for the purchase and conversion of
any Notes not converted prior to the expiration of such conversion right by an
agreement with one or more investment bankers or other purchasers to purchase
such Notes by paying to the Trustee in trust for the Noteholders, on or before
the date fixed for redemption, an amount not less than the applicable
redemption price and interest accrued to the date fixed for redemption, of such
Notes.

 

[INCLUDE
EITHER OF THE FOLLOWING PARAGRAPHS ONLY BASED UPON HOLDER’S ELECTION UNDER
SECTION 2(k) OF THE SECURITIES PURCHASE AGREEMENT] [Conversion
Limitation.      
The holder hereby agrees that in no event will it convert, and the
Company will not honor any conversion request presented to it that requests the
conversion of,  any of the Notes in
excess of the number of such Notes upon the conversion of which (x) the number
of shares of Common Stock beneficially owned by such holder (other than the
shares which would otherwise be deemed beneficially owned except for being
subject to a limitation on conversion analogous to the limitation contained in
this paragraph) plus (y) the number of shares of Common Stock issuable upon the
conversion of such Notes would be equal to or exceed 9.99% of the number of
shares of Common Stock then issued and outstanding (after giving effect to such
conversion), it being the intent of the Company and the holder that the holder
not be deemed at any time to have the power to vote or dispose of greater than
9.99% of the number of shares of Common Stock issued and outstanding.  As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). 
To the extent that the limitation contained in this paragraph applies
(and without limiting any rights the Company may otherwise have), the Company
may rely on the holder’s determination of whether the Notes are convertible
pursuant to the terms hereof, the Company having no obligation whatsoever to
verify or confirm the accuracy of such determination, and the submission of the
Conversion Notice by the holder shall be deemed to be the holder’s
representation that the Notes specified therein are convertible pursuant to the
terms hereof.  Nothing contained herein
shall be deemed to restrict the right of a holder to convert the Notes at such
time as the conversion thereof will not violate the provisions of this
paragraph.]

 

[Each holder hereby agrees that in no event will it
convert, and the Company will not honor any conversion request presented to it
that requests the conversion of, any of the Notes in excess of the number of
such Notes upon the conversion of which (x) the number of shares of Common
Stock beneficially owned by such holder (other than the shares which would
otherwise be deemed beneficially owned except for being subject to a limitation
on conversion analogous to the limitation contained in this paragraph) plus (y)
the number of shares of Common Stock issuable upon the conversion of such
Notes, would be equal to or exceed 4.99% of the number of shares of Common
Stock then issued and outstanding (after giving effect to such conversion), it
being the intent of the Company and the holder that the holder not be deemed at
any time to have the power to vote or dispose of greater than 4.99% of the
number of shares of Common Stock issued and 

 

A-10

 

outstanding.  As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). 
To the extent that the limitation contained in this paragraph applies
(and without limiting any rights the Company may otherwise have), the Company
may rely on the holder’s determination of whether the Notes are convertible
pursuant to the terms hereof, the Company having no obligation whatsoever to
verify or confirm the accuracy of such determination, and the submission of the
Conversion Notice by the holder shall be deemed to be the holder’s
representation that the Notes specified therein are convertible pursuant to the
terms hereof.  Nothing contained herein
shall be deemed to restrict the right of a holder to convert the Notes at such
time as the conversion thereof will not violate the provisions of this paragraph.
]

 

Upon due presentment for
registration of transfer of this Note and any other documents as may be
required to be delivered by the Indenture at the office or agency of the
Company which shall be the Corporate Trust Office of the Trustee, or at any other
office or agency permitted by the Indenture, a new Note or Notes of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the requirements and limitations
provided in the Indenture, without charge except for any tax or other
governmental charge imposed in connection therewith.

 

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

 

No direct or indirect
partner, employee, incorporator, stockholder, director or officer, as such,
past, present or future of the Company or any successor corporation or any
Subsidiary or any of the Company’s Affiliates, shall have any personal
liability in respect of the obligations of the Company under this Note by
reason of his, her or its status as such partner, employee, incorporator,
stockholder, director or officer.  The
holder hereof by accepting this Note waives and releases all such liability.  Such waiver and release are part of the
consideration for the issuance of this Note.

 

A-11

 

ABBREVIATIONS

 

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

 

	
  TEN
  COM - as tenants in common

  	
  UNIF GIFT MIN ACT -

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Custodian

  
	
   

  	
   

  
	
   

  	
  (Cust)

  	
   

  
	
   

  	
   

  
	
  TEN
  ENT - as tenants by the entireties

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Minor)

  	
   

  
	
   

  	
   

  
	
  JT
  TEN - as joint tenants with right

  	
   

  
	
  of
  survivorship and not as tenants

  	
  Uniform Gifts to Minors
  Act

  	
   

  	
   

  
	
  in
  common

  	
   

  	
  (State)

  
							

 

Additional abbreviations
may also be used though not in the above list.

 

A-12

 

SCHEDULE OF EXCHANGES
OF INTERESTS IN THE GLOBAL NOTE

 

The following exchanges of a part of this Global Note
for an interest in another Global Note or for a Definitive Note, or exchanges
of a part of another Global Note or Definitive Note for an interest in this
Global Note, have been made:

 

	
  Date
  of Exchange

  	
   

  	
  Amount of decrease in 

  Principal Amount of 

  this Global Note

  	
   

  	
  Amount of increase in 

  Principal Amount of 

  this Global Note

  	
   

  	
  Principal Amount 

  of this Global Note 

  following such 

  decrease (or increase)

  	
   

  	
  Signature of authorized 

  officer of Trustee or 

  Note Custodian

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-13

 

EXHIBIT B

 

[FORM OF CONVERSION NOTICE]

 

Quixote Corporation

35 East Wacker Drive

Chicago, Illinois 60601

Attention: 
Chief Financial Officer

 

LaSalle Bank National
Association

135 S. LaSalle Street

Suite 1960

Chicago, Illinois 60603

Attention:   Corporate Trust Administration

Facsimile:   (312) 904-2236

 

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

 

If you want the shares
issuable on conversion of this Note credited to your balance account with The
Depositary Trust Company through its Deposit Withdrawal Agent Commission
system, check the box:  o

 

	
  Dated: 

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature(s)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature
  Guarantee

  	
   

  
	
   

  	
   

  
	
  Signature(s)
  must be guaranteed by an eligible Guarantor Institution (banks, stock
  brokers, savings and loan associations and

  	
   

  

 

A-14

 

	
  credit unions) with
  membership in an approved signature guarantee medallion program pursuant to
  Securities and Exchange Commission Rule 17Ad-15 if shares of Common
  Stock are to be issued, or Notes to be delivered, other than to and in the
  name of the registered holder.

  	
   

  
	
   

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Street Address)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (City, State and Zip
  Code)

  	
   

  
	
   

  	
   

  
	
  Please print name and
  address

  	
   

  
	
   

  	
   

  
	
   

  	
  Principal amount to be
  converted (if less than all):
  $          ,000

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Social Security or
  Other Taxpayer

  Identification Number

  

 

A-15

 

EXHIBIT C

 

[FORM OF OPTION TO ELECT
REPAYMENT 

UPON A REPURCHASE DATE]

 

Quixote Corporation

35 East Wacker Drive

Chicago, Illinois 60601

Attention: 
Chief Financial Officer

 

LaSalle Bank National
Association

135 S. LaSalle Street

Suite 1960

Chicago, Illinois 60603

Attention:   Corporate Trust Administration

Facsimile:   (312) 904-2236

 

The undersigned
registered owner of this Note hereby acknowledges receipt of a notice from
Quixote Corporation (the “Company”) as to the occurrence of a Repurchase Date
and requests and instructs the Company to repay the entire principal amount of
this Note, or the portion thereof (which is One Thousand United States Dollars
($1,000) principal amount or an integral multiple thereof) below designated, in
accordance with the terms of the Indenture referred to in this Note, together
with accrued interest (including Liquidated Damages, if any) to, but excluding,
such date, to the registered holder hereof.

 

	
  Dated:

  	
   

  	
   

  

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature(s)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social Security or
  Other Taxpayer 

  Identification Number

  
	
   

  	
   

  
	
   

  	
  Principal amount to be
  repaid (if less than all):
  $        ,000

  
	
   

  	
   

  
	
   

  	
  NOTICE: The
  above signatures of the holder(s) hereof must correspond with the name as
  written upon the face of the Note in every particular without alteration or
  enlargement or any change whatever.

  

 

 

EXHIBIT D

 

FORM OF
CERTIFICATE OF TRANSFER

 

Quixote Corporation

35 East Wacker Drive

Chicago, Illinois 60601

Attention: 
Chief Financial Officer

 

LaSalle Bank National
Association

135 S. LaSalle Street

Suite 1960

Chicago, Illinois 60603

Attention:   Corporate Trust Administration

Facsimile:   (312) 904-2236

 

Re:  7% Convertible Senior Subordinated Notes
due 2025

 

Reference
is hereby made to the Indenture, dated as of February 9, 2005 (the
“Indenture”), among Quixote Corporation, as issuer (the “Company”), and LaSalle
Bank National Association (the “Trustee”). 
Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.

 

                             ,
(the “Transferor”) owns and proposes to transfer the Note[s] or interest in
such Note[s] specified in Annex A hereto, in the principal amount of
$                     
in such Note[s] or interests (the “Transfer”), to
                                               
(the “Transferee”), as further specified in Annex A hereto.  In connection with the Transfer, the
Transferor hereby certifies that:

 

[CHECK ALL THAT
APPLY]

 

1.  o  Check if Transferee will take delivery of a
beneficial interest in the 144A Global Note or a Definitive Note Pursuant to
Rule 144A.  

 

The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the “Securities Act”),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a “qualified institutional buyer” within
the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A
and such Transfer is in compliance with any applicable blue sky securities laws
of any state of the United States.  Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the 

 

D-1

 

restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.

 

2.  o  Check and complete if Transferee will take
delivery of a beneficial interest in the IAI Global Note or a Definitive Note
pursuant to any provision of the Securities Act other than Rule 144A or Rule
144.

 

The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):

 

(a)                                  o such Transfer is being
effected pursuant to and in accordance with Rule 144 under the Securities Act;

 

or

 

(b)                                 o such Transfer is being
effected to the Company or a subsidiary thereof;

 

or

 

(c)                                 o such Transfer is being
effected pursuant to an effective registration statement under the Securities
Act and in compliance with the prospectus delivery requirements of the
Securities Act;

 

or

 

(d)                                o such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A or Rule 144, and the
Transferor hereby further certifies that it has not engaged in any general
solicitation within the meaning of Regulation D under the Securities Act and
the Transfer complies with the transfer restrictions applicable to beneficial
interests in a Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is supported by (1)
a certificate executed by the Transferee in the form of Exhibit F to the
Indenture and (2) an Opinion of Counsel provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this certification),
to the effect that such Transfer is in compliance with the Securities Act.  Upon consummation of the proposed transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the IAI Global Note and/or the
Definitive Notes and in the Indenture and the Securities Act.

 

3.  o  Check if Transferee will take delivery of a
beneficial interest in the Unrestricted Global Note or of an Unrestricted
Definitive Note.

 

(a)  o Check if Transfer is
pursuant to Rule 144.  (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to 

 

D-2

 

maintain
compliance with the Securities Act.  Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.

 

(b)  o Check if Transfer is
Pursuant to Other Exemption. 
(i) The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other than
Rule 144, and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act.  Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes or Restricted Definitive Notes
and in the Indenture.

 

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

 

 

	
   

  	
   

  
	
   

  	
  [Insert Name of
  Transferor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
    Name:

  
	
   

  	
    Title:

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature
  Guarantee

  	
   

  
	
   

  	
   

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

  	
   

  
						

 

D-3

 

ANNEX A TO
CERTIFICATE OF TRANSFER

 

1.                                       The Transferor owns and proposes to transfer
the following:

 

[CHECK ONE OF (a)
OR (b)]

 

(a)  o  a beneficial
interest in the:

 

(i)                                     o  144A Global
Note (CUSIP 749056 AE 7), or

 

(ii)                                  o   IAI Global
Note (CUSIP 749056 AF 4); or

 

(b)  o  a Restricted
Definitive Note.

 

2.                                       After the Transfer the Transferee will
hold:

 

[CHECK ONE]

 

(a) 
o  a beneficial
interest in the:

 

(i)                                     o  144A Global
Note (CUSIP 749056 AE 7), or

 

(ii)                                  o   IAI Global
Note (CUSIP 749056 AF 4); or

 

(iii)                               o  Unrestricted
Global Note (CUSIP 749056 AG 2); or

 

(b)  o  a Restricted
Definitive Note; or

 

(c) 
o  an
Unrestricted Definitive Note,

 

in accordance with the terms of the Indenture.

 

D-4

 

EXHIBIT E

 

FORM OF
CERTIFICATE OF EXCHANGE

 

Quixote Corporation

35 East Wacker Drive

Chicago, Illinois 60601

Attention: 
Chief Financial Officer

 

LaSalle Bank National
Association

135 S. LaSalle Street

Suite 1960

Chicago, Illinois 60603

Attention:   Corporate Trust Administration

Facsimile:   (312) 904-2236

 

Re:  7% Convertible Senior Subordinated Notes
due 2025

 

(CUSIP
[                ])

 

Reference
is hereby made to the Indenture, dated as of February 9, 2005 (the
“Indenture”), among Quixote Corporation, as issuer (the “Company”), and LaSalle
Bank National Association (the “Trustee”). 
Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.

 

                                 
(the “Owner”), owns and proposes to exchange the Note[s] or interest in such
Note[s] specified herein, in the principal amount of $                   
in such Note[s] or interests (the “Exchange”). 
In connection with the Exchange, the Owner hereby certifies that:

 

1.                                       Exchange of Restricted
Definitive Notes or Beneficial Interests in a Restricted Global Note for
Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global
Note.

 

(a)  o                Check if Exchange is from
beneficial interest in a Restricted Global Note to beneficial interest in an
Unrestricted Global Note.  In connection with the
Exchange of the Owner’s beneficial interest in a Restricted Global Note for a
beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner’s own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States
Securities Act of 1933, as amended (the “Securities Act”), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any
state of the United States.

 

E-1

 

(b)  o               Check if Exchange is from
beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. 
In connection with the Exchange of the Owner’s beneficial interest in a
Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Definitive Note is being acquired for the Owner’s own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Definitive
Note is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.

 

(c)  o                Check if Exchange is from
Restricted Definitive Note to beneficial interest in an Unrestricted Global
Note.  In connection with the Owner’s Exchange of a
Restricted Definitive Note for a beneficial interest in an Unrestricted Global
Note, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner’s own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.

 

(d)  o               Check if Exchange is from
Restricted Definitive Note to Unrestricted Definitive Note. 
In connection with the Owner’s Exchange of a Restricted Definitive Note
for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Unrestricted Definitive Note is being acquired for the Owner’s own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.

 

2.                                       Exchange of Restricted
Definitive Notes or Beneficial Interests in Restricted Global Notes for
Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes.

 

(a)  o                Check if Exchange is from
beneficial interest in a Restricted Global Note to Restricted Definitive Note. 
In connection with the Exchange of the Owner’s beneficial interest in a
Restricted Global Note for a Restricted Definitive Note with an equal principal
amount, the Owner hereby certifies that the Restricted Definitive Note is being
acquired for the Owner’s own account without transfer.  Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.

 

(b)  o               Check if Exchange is from
Restricted Definitive Note to beneficial interest in a Restricted Global Note. 
In connection with the Exchange of the Owner’s 

 

E-2

 

Restricted
Definitive Note for a beneficial interest in the [CHECK ONE] o144A Global Note, 
oIAI Global Note with an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner’s own account without transfer and (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to
the Restricted Global Notes and pursuant to and in accordance with the
Securities Act, and in compliance with any applicable blue sky securities laws
of any state of the United States.  Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Indenture and the Securities Act.

 

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

 

	
   

  	
   

  
	
   

  	
  [Insert Name of
  Transferor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
    Name:

  
	
   

  	
    Title:

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature
  Guarantee

  	
   

  
	
   

  	
   

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

  	
   

  
						

 

E-3

 

EXHIBIT F

 

FORM OF TRANSFER LETTER OF
REPRESENTATIONS

 

 

(TO BE DELIVERED BY HOLDER

 

UPON CERTAIN TRANSFERS OF NOTES
WITHOUT

 

EFFECTIVE REGISTRATION STATEMENT)

 

We are
delivering this letter in connection with the sale or transfer to us of Notes
(as defined in the Indenture, dated as of February 9, 2005, between Quixote
Corporation, a Delaware corporation (the “Company”) and LaSalle Bank National
Association, a national banking association (the “Trustee”)) other than
pursuant to a registration statement that has been declared effective under the
Securities Act of 1933, as amended (the “Securities Act”).

 

We
hereby confirm that:

 

(i)                                     we are an “accredited investor” within
the meaning of Rule 501(a)(1),(2), (3), (5), (6), (7) or (8) under the
Securities Act;

 

(ii)                                  any purchase or receipt of the Notes by
us will be for investment purposes and for our own account, not as a nominee or
agent;

 

(iii)                               we have such knowledge and experience in
financial and business matters that we are capable of evaluating the merits and
risks of purchasing or receiving the Notes;

 

(iv)                              we do not have need for liquidity in our
investment in the Notes, we have the ability to bear the economic risks of our
investment in the Notes for an indefinite period of time and we are able to
afford the complete loss of our investment in the Notes;

 

(v)                                 we are not acquiring the Notes with a
view to any distribution thereof in a transaction that would violate the
Securities Act or the securities laws of any State of the United States or any
other applicable jurisdiction, and we have no present intention of selling,
granting any participation in, or otherwise distributing the same;

 

(vi)                              we have had access to such information
regarding the Company necessary in order for us to make an informed decision
and any such information which we have requested have been made available for
us or our attorney, accountant, or advisor; and

 

 

(vii)                           we or our attorney, accountant, or
advisor have had a reasonable opportunity to ask questions of and receive
answers from a person or persons acting on behalf of the Company concerning the
business, management and financial affairs of the Company and the terms and
conditions of the acquisition by us of the Notes and all such questions have
been answered to our full satisfaction, and we have acquired sufficient
information about the Company to make an informed and knowledgeable decision to
acquire the Notes.

 

We understand that the Notes have not been registered
under the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Notes, that such Notes may be offered, resold,
pledged or otherwise transferred only (i) in accordance with an exemption from
the registration requirements of the Securities Act, (ii) to the Company or
(iii) pursuant to an effective registration statement, and, in each case, in accordance
with any applicable securities laws of any State of the United States or any
other applicable jurisdiction.  We agree
that we will furnish the Company and the Trustee an opinion of counsel, if the
Company so requests, that the foregoing restrictions on transfer have been
complied with.  We understand that the
Trustee will not be required to accept for registration of transfer any Notes,
except upon presentation of evidence satisfactory to the Company, including an
opinion of counsel if the Company so requests, that the foregoing restrictions
on transfer have been complied with.

 

We acknowledge that the Company and others will rely
upon our confirmations, acknowledgements and agreements set forth herein, and
we agree to notify you promptly in writing if any of our representations or
warranties herein ceases to be accurate and complete.

 

 

	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address:

  

 

2

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