Document:

Exhibit 10.6

 

 

 

AMERICAN CAPITAL ACCESS
HOLDINGS LIMITED,

as Issuer

 

 

 

 

INDENTURE

Dated as of December 4, 2002

 

 

 

STATE STREET BANK AND TRUST
COMPANY OF 

CONNECTICUT, NATIONAL ASSOCIATION,

as Trustee

 

 

 

FLOATING RATE JUNIOR SUBORDINATED
DEFERRABLE

INTEREST DEBENTURES

 

 

DUE 2032

 

 

 

 

American Capital

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  I. DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II. DEBENTURES

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  Authentication
  and Dating

  	
  6

  
	
  Section 2.2.

  	
  Form
  of Trustee’s Certificate of Authentication

  	
  7

  
	
  Section 2.3.

  	
  Form
  and Denomination of Debentures

  	
  7

  
	
  Section 2.4.

  	
  Execution
  of Debentures

  	
  7

  
	
  Section 2.5.

  	
  Exchange
  and Registration of Transfer of Debentures

  	
  8

  
	
  Section 2.6.

  	
  Mutilated,
  Destroyed, Lost or Stolen Debentures

  	
  10

  
	
  Section 2.7.

  	
  Temporary
  Debentures

  	
  10

  
	
  Section 2.8.

  	
  Payment
  of Interest and Additional Interest

  	
  11

  
	
  Section 2.9.

  	
  Cancellation
  of Debentures Paid, etc

  	
  12

  
	
  Section 2.10.

  	
  Computation
  of Interest

  	
  12

  
	
  Section 2.11.

  	
  Extension
  of Interest Payment Period

  	
  13

  
	
  Section 2.12.

  	
  CUSIP
  Numbers

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III. PARTICULAR COVENANTS OF THE COMPANY

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

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

  	
  15

  
	
  Section 3.2.

  	
  Offices
  for Notices and Payments, etc

  	
  15

  
	
  Section 3.3.

  	
  Appointments
  to Fill Vacancies in Trustee’s Office

  	
  16

  
	
  Section 3.4.

  	
  Provision
  as to Paying Agent

  	
  16

  
	
  Section 3.5.

  	
  Certificate
  to Trustee

  	
  17

  
	
  Section 3.6.

  	
  Additional
  Sums

  	
  17

  
	
  Section 3.7.

  	
  Compliance
  with Consolidation Provisions

  	
  17

  
	
  Section 3.8.

  	
  Limitation
  on Dividends

  	
  17

  
	
  Section 3.9.

  	
  Covenants
  as to the Trust

  	
  18

  
	
  Section 3.10.

  	
  Additional
  Junior Indebtedness

  	
  18

  
	
  Section 3.11.

  	
  Consent
  to Jurisdiction and Venue

  	
  18

  
	
   

  	
   

  	
   

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

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Securityholders
  Lists

  	
  18

  
	
  Section 4.2.

  	
  Preservation
  and Disclosure of Lists

  	
  19

  
	
   

  	
   

  	
   

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

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Events
  of Default

  	
  20

  
	
  Section 5.2.

  	
  Payment
  of Debentures on Default; Suit Therefor

  	
  21

  
	
  Section 5.3.

  	
  Application
  of Moneys Collected by Trustee

  	
  23

  
	
  Section 5.4.

  	
  Proceedings
  by Securityholders

  	
  23

  
	
  Section 5.5.

  	
  Proceedings
  by Trustee

  	
  23

  
	
  Section 5.6.

  	
  Remedies
  Cumulative and Continuing; Delay or Omission Not a Waiver

  	
  24

  

 

i

 

	
  Section 5.7.

  	
  Direction
  of Proceedings and Waiver of Defaults by Majority of Securityholders

  	
  24

  
	
  Section 5.8.

  	
  Notice
  of Defaults

  	
  25

  
	
  Section 5.9.

  	
  Undertaking
  to Pay Costs

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI. CONCERNING THE TRUSTEE

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  Duties
  and Responsibilities of Trustee

  	
  25

  
	
  Section 6.2.

  	
  Reliance
  on Documents, Opinions, etc

  	
  26

  
	
  Section 6.3.

  	
  No
  Responsibility for Recitals, etc

  	
  27

  
	
  Section 6.4.

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

  	
  27

  
	
  Section 6.5.

  	
  Moneys
  to be Held in Trust

  	
  27

  
	
  Section 6.6.

  	
  Compensation
  and Expenses of Trustee

  	
  27

  
	
  Section 6.7.

  	
  Officers’
  Certificate as Evidence

  	
  28

  
	
  Section 6.8.

  	
  Eligibility
  of Trustee

  	
  28

  
	
  Section 6.9.

  	
  Resignation
  or Removal of Trustee

  	
  29

  
	
  Section 6.10.

  	
  Acceptance
  by Successor Trustee

  	
  30

  
	
  Section 6.11.

  	
  Succession
  by Merger, etc

  	
  30

  
	
  Section 6.12.

  	
  Authenticating
  Agents

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII. CONCERNING THE SECURITYHOLDERS

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Action
  by Securityholders

  	
  32

  
	
  Section 7.2.

  	
  Proof
  of Execution by Securityholders

  	
  32

  
	
  Section 7.3.

  	
  Who
  Are Deemed Absolute Owners

  	
  32

  
	
  Section 7.4.

  	
  Debentures
  Owned by Company Deemed Not Outstanding

  	
  33

  
	
  Section 7.5.

  	
  Revocation
  of Consents; Future Holders Bound

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII. SECURITYHOLDERS’ MEETINGS

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Purposes
  of Meetings

  	
  33

  
	
  Section 8.2.

  	
  Call
  of Meetings by Trustee

  	
  34

  
	
  Section 8.3.

  	
  Call
  of Meetings by Company or Securityholders

  	
  34

  
	
  Section 8.4.

  	
  Qualifications
  for Voting

  	
  34

  
	
  Section 8.5.

  	
  Regulations

  	
  34

  
	
  Section 8.6.

  	
  Voting

  	
  34

  
	
  Section 8.7.

  	
  Quorum;
  Actions

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX. SUPPLEMENTAL INDENTURES

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
  Supplemental
  Indentures without Consent of Securityholders

  	
  35

  
	
  Section 9.2.

  	
  Supplemental
  Indentures with Consent of Securityholders

  	
  37

  
	
  Section 9.3.

  	
  Effect
  of Supplemental Indentures

  	
  37

  
	
  Section 9.4.

  	
  Notation
  on Debentures

  	
  38

  
	
  Section 9.5.

  	
  Evidence
  of Compliance of Supplemental Indenture to be Furnished to Trustee

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  X. REDEMPTION OF SECURITIES

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
  Optional
  Redemption

  	
  38

  
	
  Section 10.2.

  	
  Special
  Event Redemption

  	
  38

  
	
  Section 10.3.

  	
  Notice
  of Redemption; Selection of Debentures

  	
  38

  
	
  Section 10.4.

  	
  Payment
  of Debentures Called for Redemption

  	
  39

  

 

ii

 

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

  	
  39

  
	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
  Company
  May Consolidate, etc., on Certain Terms

  	
  39

  
	
  Section 11.2.

  	
  Successor
  Entity to be Substituted

  	
  40

  
	
  Section 11.3.

  	
  Opinion
  of Counsel to be Given to Trustee

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XII. SATISFACTION AND DISCHARGE OF INDENTURE

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 12.1.

  	
  Discharge
  of Indenture

  	
  40

  
	
  Section 12.2.

  	
  Deposited
  Moneys to be Held in Trust by Trustee

  	
  41

  
	
  Section 12.3.

  	
  Paying
  Agent to Repay Moneys Held

  	
  41

  
	
  Section 12.4.

  	
  Return
  of Unclaimed Moneys

  	
  41

  
	
   

  	
   

  	
   

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

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 13.1.

  	
  Indenture
  and Debentures Solely Corporate Obligations

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIV. MISCELLANEOUS PROVISIONS

  	
  42

  
	
   

  	
   

  	
   

  
	
  Section 14.1.

  	
  Successors

  	
  42

  
	
  Section 14.2.

  	
  Official
  Acts by Successor Entity

  	
  42

  
	
  Section 14.3.

  	
  Surrender
  of Company Powers

  	
  42

  
	
  Section 14.4.

  	
  Addresses
  for Notices, etc

  	
  42

  
	
  Section 14.5.

  	
  Governing
  Law

  	
  42

  
	
  Section 14.6.

  	
  Evidence
  of Compliance with Conditions Precedent

  	
  42

  
	
  Section 14.7.

  	
  Non-Business
  Days

  	
  43

  
	
  Section 14.8.

  	
  Table
  of Contents, Headings, etc

  	
  43

  
	
  Section 14.9.

  	
  Execution
  in Counterparts

  	
  43

  
	
  Section 14.10.

  	
  Separability

  	
  43

  
	
  Section 14.11.

  	
  Assignment

  	
  43

  
	
  Section 14.12.

  	
  Acknowledgment
  of Rights

  	
  43

  
	
  Section 14.13.

  	
  Submission
  to Jurisdiction; Appointment of Agent for Service

  	
  44

  
	
  Section 14.14.

  	
  Judgment
  Currency

  	
  44

  
	
  Section 14.15.

  	
  Waiver
  of Immunity

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XV. SUBORDINATION OF DEBENTURES

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section 15.1.

  	
  Agreement
  to Subordinate

  	
  45

  
	
  Section 15.2.

  	
  Default
  on Senior Indebtedness

  	
  45

  
	
  Section 15.3.

  	
  Liquidation,
  Dissolution, Bankruptcy

  	
  45

  
	
  Section 15.4.

  	
  Subrogation

  	
  46

  
	
  Section 15.5.

  	
  Trustee
  to Effectuate Subordination

  	
  47

  
	
  Section 15.6.

  	
  Notice
  by the Company

  	
  47

  
	
  Section 15.7.

  	
  Rights
  of the Trustee; Holders of Senior Indebtedness

  	
  48

  
	
  Section 15.8.

  	
  Subordination
  May Not Be Impaired

  	
  48

  
	
   

  	
   

  
	
  Exhibit A

  	
  Form
  of Junior Subordinated Deferrable Interest Debenture

  	
   

  
				

 

iii

 

THIS
INDENTURE, dated as of December 4, 2002, between American Capital Access
Holdings Limited, a Bermuda corporation (the “Company”), and State
Street Bank and Trust Company of Connecticut, National Association, a national
banking association organized under the laws of the United States of America,
as debenture trustee (the “Trustee”).

 

WITNESSETH:

 

WHEREAS,
for its lawful corporate purposes, the Company has duly authorized the issuance
of its Floating Rate Junior Subordinated Deferrable Interest Debentures due
2032 (the “Debentures”) under this Indenture to provide, among other
things, for the execution and authentication, delivery and administration
thereof, and the Company has duly authorized the execution of this Indenture;
and

 

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

 

NOW,
THEREFORE, This Indenture Witnesseth:

 

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

 

ARTICLE
I.

DEFINITIONS

 

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

 

“Additional
Interest” means interest, if any, that shall accrue on any interest on the
Debentures the payment of which has not been made on the applicable Interest Payment
Date and which shall accrue at the Interest Rate, compounded quarterly (to the
extent permitted by law).

 

“Additional
Junior Indebtedness” means, without duplication and other than the
Debentures, any indebtedness, liabilities or obligations of the Company, or any
Subsidiary of the Company, under debt securities (or guarantees in respect of
debt securities) initially issued after the date of this Indenture to any
trust, or a trustee of a trust, partnership or other entity affiliated with the
Company that is, directly or indirectly, a finance subsidiary (as such term is
defined in Rule 3a-5 under the Investment Company Act of 1940) or other
financing vehicle of the Company or any Subsidiary of the Company in connection
with the issuance by that entity of preferred securities or other securities
that are issued on a pari passu
basis with the Debentures.

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

“Capital
Securities Guarantee” means the guarantee agreement that the Company enters
into with State Street Bank and Trust Company of Connecticut, National
Association, as guarantee trustee, or other Persons that operates directly or
indirectly for the benefit of holders of Capital Securities of the Trust.

 

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

 

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

 

“Company”
means American Capital Access Holdings Limited, a Bermuda corporation, and,
subject to the provisions of Article XI, shall include its successors and
assigns.

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

“Distribution
Period” has the meaning set forth in Section 2.8.

 

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

 

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

 

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

 

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

 

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

 

“Interest
Payment Date” means each March 4, June 4, September 4 and December 4 during
the term of this Indenture.

 

“Interest
Rate” means for the period beginning on (and including) the date of
original issuance and ending on (but excluding) March 4, 2003 the rate per
annum of 5.42375% and for each Distribution Period thereafter, the Coupon Rate.

 

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

 

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

 

“Maturity
Date” means December 4, 2032.

 

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

 

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

 

“Optional
Redemption Price” means 100% of the principal amount of the Debentures
being redeemed, plus accrued and unpaid interest on such Debentures to the
Redemption Date.

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

“Principal
Office of the Trustee,” or other similar term, means the office of the
Trustee, at which at any particular time its corporate trust business shall be
principally administered, which at the time of the execution of this Indenture
shall be 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.

 

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

 

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

 

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

 

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

 

“Senior
Indebtedness” means, with respect to the Company, (i) the principal,
premium, if any, and interest in respect of (A) indebtedness of the
Company for money borrowed and (B) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company;
(ii) all capital lease obligations of the Company; (iii) all
obligations of the Company issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Company and all obligations
of the Company under any title retention agreement; (iv) all obligations
of the Company for 

 

4

 

the
reimbursement of any letter of credit, any banker’s acceptance, any security
purchase facility, any repurchase agreement or similar arrangement, any
interest rate swap, any other hedging arrangement, any obligation under options
or any similar credit or other transaction; (v) all obligations of the
type referred to in clauses (i) through (iv) above of other Persons for
the payment of which the Company is responsible or liable as obligor, guarantor
or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) above of other Persons secured by any lien on any
property or asset of the Company (whether or not such obligation is assumed by
the Company), whether incurred on or prior to the date of this Indenture or
thereafter incurred.  Notwithstanding the
foregoing, “Senior Indebtedness” shall not include (1) any Additional
Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and
guarantees in respect of such Debentures, (3) trade accounts payable of the
Company arising in the ordinary course of business (such trade accounts payable
being pari passu in right of
payment to the Debentures), or (4) obligations with respect to which (a) in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are pari passu, junior or otherwise not
superior in right of payment to the Debentures and (b) the Company, prior to
the issuance thereof, has, if required, notified the relevant state insurance
regulatory agency.  Senior Indebtedness
shall continue to be Senior Indebtedness and be entitled to the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness.

 

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

 

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

 

“Special
Redemption Price” means (i) 107.5% of the principal amount of the
Debentures being redeemed on a Special Redemption Date that occurs before
December 4, 2007 and (ii) 100% of the principal amount of the Debentures being
redeemed on a Special Redemption Date that occurs on December 4, 2007 or after,
plus accrued and unpaid interest on such Debentures to the Special Redemption
Date.

 

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

 

“Tax
Event” means the receipt by the Company and the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to or change (including any announced prospective change) in the laws
or any regulations thereunder of the United States or any political subdivision
or taxing authority thereof or therein, or as a result of any official
administrative pronouncement (including any private letter ruling, technical
advice memorandum, field service advice, regulatory procedure, notice or
announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an “Administrative Action”)) or judicial
decision interpreting or applying such laws or regulations, regardless of
whether such Administrative Action or judicial decision is issued to or in
connection with a proceeding involving the Company or the Trust and whether or
not subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in each
case on or after the date of original issuance of the Debentures, there 

 

5

 

is
more than an insubstantial risk that: 
(i) the Trust is, or will be within 90 days of the date of
such opinion, subject to United States federal income tax with respect to
income received or accrued on the Debentures; (ii) interest payable by the
Company on the Debentures is not, or within 90 days of the date of such
opinion, will not be, deductible by the Company, in whole or in part, for
United States federal income tax purposes; or (iii) the Trust is, or will
be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.

 

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

 

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

 

“Trust”
shall mean ACA Statutory Trust I, a Connecticut statutory trust, or any
other similar trust created for the purpose of issuing Capital Securities in
connection with the issuance of Debentures under this Indenture, of which ACA
Financial Assets, L.L.C., a Delaware limited liability company, which is a
wholly owned subsidiary of the Company, is the sponsor.

 

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

 

“Trustee”
means State Street Bank and Trust Company of Connecticut, National Association,
and, subject to the provisions of Article VI hereof, shall also include
its successors and assigns as Trustee hereunder.

 

ARTICLE
II.

DEBENTURES

 

Section 2.1.           Authentication
and Dating. Upon the execution
and delivery of this Indenture, or from time to time thereafter, Debentures in
an aggregate principal amount not in excess of $18,042,000.00 may be executed
and delivered by the Company to the Trustee for authentication, and the Trustee
shall thereupon authenticate and make available for delivery said Debentures to
or upon the written order of the Company, signed by its Chairman of the Board
of Directors, Chief Executive Officer, Vice Chairman, the President, one of its
Managing Directors or one of its Vice Presidents without any further action by
the Company hereunder.  In authenticating
such Debentures, and accepting the additional responsibilities under this
Indenture in relation to such Debentures, the Trustee shall be entitled to
receive, and (subject to Section 6.1) shall be fully protected in relying
upon:

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

State
Street Bank and Trust Company of Connecticut, National Association, as Trustee

 

	
  By

  	
   

  	
   

  
	
  Authorized
  Signer

  

 

Section 2.3.           Form
and Denomination of Debentures.  The Debentures shall be substantially in the form of Exhibit A attached
hereto.  The Debentures shall be in
registered, certificated form without coupons and in minimum denominations of
$500,000.00 and any multiple of $1,000.00 in excess thereof.  Any attempted transfer of the Debentures in a
block having an aggregate principal amount of less than $500,000.00 shall be
deemed to be voided and of no legal effect whatsoever.  Any such purported transferee shall be deemed
not to be a holder of such Debentures for any purpose, including, but not
limited to the receipt of payments on such Debentures, and such purported
transferee shall be deemed to have no interest whatsoever in such
Debentures.  The Debentures shall be
numbered, lettered, or otherwise distinguished in such manner or in accordance
with such plans as the officers executing the same may determine with the
approval of the Trustee as evidenced by the execution and authentication
thereof.

 

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

 

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

 

7

 

the Company, although at the date of the
execution of this Indenture any such person was not such an officer.

 

Every
Debenture shall be dated the date of its authentication.

 

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

 

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

 

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

 

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

 

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

 

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

 

THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE
SECURITIES LAW.  NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.  THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
THIS SECURITY ONLY 

 

8

 

(A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE)
OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
“ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH
THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

 

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

 

THIS SECURITY WILL BE ISSUED
AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF
NOT LESS THAN $500,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $500,000.00 SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

 

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

 

9

 

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

 

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

 

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

 

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

 

10

 

Debentures shall in all respects be entitled
to the same benefits under this Indenture as definitive Debentures
authenticated and delivered hereunder.

 

Section 2.8.           Payment
of Interest and Additional Interest.   Interest at the Interest Rate and any
Additional Interest on any Debenture that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date for Debentures shall be paid to
the Person in whose name said Debenture (or one or more Predecessor Securities)
is registered at the close of business on the regular record date for such
interest installment except that interest and any Additional Interest payable
on the Maturity Date shall be paid to the Person to whom principal is
paid.  In the event that any Debenture or
portion thereof is called for redemption and the redemption date is subsequent
to a regular record date with respect to any Interest Payment Date and prior to
such Interest Payment Date, interest on such Debenture will be paid upon
presentation and surrender of such Debenture.

 

Each
Debenture shall bear interest for the period beginning on (and including) the
date of original issuance and ending on (but excluding) March 4, 2003 at a rate
per annum of 5.42375%, and shall bear interest for each successive period
beginning on (and including) March 4, 2003, and each succeeding Interest
Payment Date, and ending on (but excluding) the next succeeding Interest
Payment Date (each, a “Distribution Period”) at a rate per annum equal
to the 3-Month LIBOR, determined as described in Section 2.10, plus 4.00%
(the “Coupon Rate”); provided, however, that prior to
December 4, 2007, the Coupon Rate shall not exceed 12.50%, applied to the
principal amount thereof, until the principal thereof becomes due and payable,
and on any overdue principal and to the extent that payment of such interest is
enforceable under applicable law (without duplication) on any overdue
installment of interest at the Interest Rate compounded quarterly.  Interest shall be payable (subject to any
relevant Extension Period) quarterly in arrears on each Interest Payment Date
with the first installment of interest to be paid on March 4, 2003.

 

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

 

11

 

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

 

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

 

The
term “regular record date” as used in this Section shall mean the close of
business on the 15th day next preceding the applicable Interest
Payment Date.

 

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

 

Section 2.9.           Cancellation
of Debentures Paid, etc.   All Debentures surrendered for the purpose of payment, redemption,
exchange or registration of transfer, shall, if surrendered to the Company or
any paying agent, be surrendered to the Trustee and promptly canceled by it,
or, if surrendered to the Trustee or any Authenticating Agent, shall be
promptly canceled by it, and no Debentures shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Indenture.  All Debentures canceled by any Authenticating
Agent shall be delivered to the Trustee. 
The Trustee shall destroy all canceled Debentures unless the Company
otherwise directs the Trustee in writing. 
If the Company shall acquire any of the Debentures, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
surrendered to the Trustee for cancellation.

 

Section 2.10.        Computation
of Interest.   The
amount of interest payable for the Distribution Period commencing on March 4,
2003 and each succeeding Distribution Period will be calculated by applying the
Interest Rate to the principal amount outstanding at the commencement of the
Distribution Period and multiplying each such amount by the actual number of
days in the Distribution Period concerned divided by 360.  In the event that any date on which interest
is payable on the Debentures is not a Business Day, then payment of interest
payable on such date shall be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment
was originally payable.  All percentages
resulting from any calculations on the Debentures will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upward (e.g., 9.876545% or
..09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in
or resulting from such calculation will be rounded to the nearest cent (with
one-half cent being rounded upward)).

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 2.11.        Extension
of Interest Payment Period.  So long as no Event of Default has occurred
and is continuing, the Company shall have the right, from time to time, and
without causing an 

 

13

 

Event of Default, to defer payments of
interest on the Debentures by extending the interest payment period on the
Debentures at any time and from time to time during the term of the Debentures,
for up to 20 consecutive quarterly periods (each such extended interest payment
period, an “Extension Period”), during which Extension Period no
interest (including Additional Interest) shall be due and payable.  No Extension Period may end on a date other
than an Interest Payment Date.  At the
end of any such Extension Period the Company shall pay all interest then
accrued and unpaid on the Debentures (together with Additional Interest
thereon); provided, however, that no Extension Period may extend
beyond the Maturity Date; provided  further, however, that
during any such Extension Period, the Company shall not and shall not permit
any Affiliate to (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Company’s or such Affiliate’s capital stock (other than payments of
dividends or distributions to the Company) or make any guarantee payments with
respect to the foregoing or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt securities
of the Company or any Affiliate that rank pari
passu in all respects with or junior in interest to the Debentures
(other than, with respect to clauses (i) or (ii) above, (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into
prior to the applicable Extension Period, (b) as a result of any exchange
or conversion of any class or series of the Company’s capital stock (or any
capital stock of a subsidiary of the Company) for any class or series of the
Company’s capital stock or of any class or series of the Company’s indebtedness
for any class or series of the Company’s capital stock, (c) the purchase
of fractional interests in shares of the Company’s capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholders’ rights plan, or the issuance of rights, stock
or other property under any stockholders’ rights plan, or the redemption or
repurchase of rights pursuant thereto, (e) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock
and any cash payments in lieu of fractional shares issued in connection
therewith, or (f) payments under the Capital Securities Guarantee).  Prior to the termination of any Extension
Period, the Company may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof
shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date.  Upon the termination of
any Extension Period and upon the payment of all accrued and unpaid interest
and Additional Interest, the Company may commence a new Extension Period,
subject to the foregoing requirements. 
No interest or Additional Interest shall be due and payable during an
Extension Period, except at the end thereof, but each installment of interest
that would otherwise have been due and payable during such Extension Period
shall bear Additional Interest to the extent permitted by applicable law.  The Company must give the Trustee notice of
its election to begin or extend such Extension Period at least 5 Business Days
prior to the regular record date (as such term is used in Section 2.8)
immediately preceding the Interest Payment Date with respect to which interest
on the Debentures would have been payable except for the election to begin or
extend such Extension Period .  The
Trustee shall give notice of the Company’s election to begin a new Extension
Period to the Securityholders.

 

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

 

14

 

omission of such numbers.  The Company will promptly notify the Trustee
in writing of any change in the CUSIP numbers.

 

ARTICLE
III.

PARTICULAR COVENANTS OF THE COMPANY

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

Section 3.4.           Provision
as to Paying Agent.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

Section 3.6.           Additional
Sums.  If and for so
long as the Trust is the holder of all Debentures and the Trust is required to
pay any additional taxes, duties, assessments or other governmental charges as
a result of a Tax Event, the Company will pay such additional amounts (“Additional
Sums”) on the Debentures as shall be required so that the net amounts
received and retained by the Trust after paying taxes, duties, assessments or
other governmental charges will be equal to the amounts the Trust would have
received if no such taxes, duties, assessments or other governmental charges
had been imposed.  Whenever in this
Indenture or the Debentures there is a reference in any context to the payment
of principal of or interest on the Debentures, such mention shall be deemed to
include mention of payments of the Additional Sums provided for in this
paragraph to the extent that, in such context, Additional Sums are, were or
would be payable in respect thereof pursuant to the provisions of this
paragraph and express mention of the payment of Additional Sums (if applicable)
in any provisions hereof shall not be construed as excluding Additional Sums in
those provisions hereof where such express mention is not made; provided,
however, that the deferral of the payment of interest during an
Extension Period pursuant to Section 2.11 shall not defer the payment of
any Additional Sums that may be due and payable.

 

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

 

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

 

17

 

a subsidiary of the Company) for any class or
series of the Company’s capital stock or of any class or series of the
Company’s indebtedness for any class or series of the Company’s capital stock,
(3) the purchase of fractional interests in shares of the Company’s
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (4) any declaration of
a dividend in connection with any stockholders’ rights plan, or the issuance of
rights, stock or other property under any stockholders’ rights plan, or the
redemption or repurchase of rights pursuant thereto, (5) any dividend in
the form of stock, warrants, options or other rights where the dividend stock
or the stock issuable upon exercise of such warrants, options or other rights
is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock
and any cash payments in lieu of fractional shares issued in connection
therewith, or (6) payments under the Capital Securities Guarantee).

 

Section 3.9.           Covenants
as to the Trust.  For so long as the Trust Securities remain
outstanding, the Company shall maintain 100% ownership of the Common
Securities; provided, however, that any permitted successor of
the Company under this Indenture may succeed to the Company’s ownership of such
Common Securities.  The Company, as owner
of the Common Securities, shall, except in connection with a distribution of
Debentures to the holders of Trust Securities in liquidation of the Trust, the
redemption of all of the Trust Securities or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, cause the Trust (a) to
remain a statutory trust, (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes, and (c) to
cause each holder of Trust Securities to be treated as owning an undivided
beneficial interest in the Debentures.

 

Section 3.10.        Additional
Junior Indebtedness.  The Company shall not, and it shall not cause
or permit any Subsidiary of the Company to, incur, issue or be obligated on any
Additional Junior Indebtedness, either directly or indirectly, by way of
guarantee, suretyship or otherwise, other than Additional Junior Indebtedness
that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the
Debentures.

 

Section 3.11.        Consent
to Jurisdiction and Venue.  The Company has validly and irrevocably
submitted to the nonexclusive jurisdiction of any New York Court (as defined in
Section 14.13 of this Indenture) with respect to suits, actions or proceedings
arising out of or in connection with violations of United States federal
securities laws relating to offers and sales of the Capital Securities, has
validly and irrevocably waived, to the fullest extent permitted by law, any
objections that it may now or hereafter have to the laying of venue of any such
suit, action or proceeding brought in any New York Court based on or arising
under this Agreement or any claims that any such suit, action or proceeding
brought in any New York Court has been brought in an inconvenient forum, and
has duly and irrevocably appointed CT Corporation System in New York, New York
as its agent to receive service of process with respect to actions arising out
of or in connection with any such suit, action or proceeding; and service of
process effected in the manner set forth in Section 14.13 of this Indenture
will be effective under the laws of Bermuda to confer personal jurisdiction
over the Company.

 

ARTICLE
IV.

SECURITYHOLDERS LISTS AND REPORTS

BY THE COMPANY AND THE TRUSTEE

 

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

 

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

 

18

 

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

 

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

 

Section 4.2.           Preservation
and Disclosure of Lists.

 

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

 

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

 

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

 

(2)           inform such applicants as to the
approximate number of holders of Debentures whose names and addresses appear in
the information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2, and as to the
approximate cost of mailing to such Securityholders the form of proxy or other
communication, if any, specified in such application.

 

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

 

19

 

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

 

ARTICLE
V.

REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS

UPON AN EVENT OF DEFAULT

 

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

 

(a)           the Company defaults in the payment of
any interest upon any Debenture when it becomes due and payable, and fails to
cure such default for a period of 30 days; provided, however,
that a valid extension of an interest payment period by the Company in
accordance with the terms of this Indenture shall not constitute a default in
the payment of interest for this purpose; or

 

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

 

(c)           the Company defaults in the performance
of, or breaches, any of its covenants or agreements in this Indenture or in the
terms of the Debentures established as contemplated in this Indenture (other
than a covenant or agreement a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in aggregate principal amount of
the outstanding Debentures, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a “Notice of
Default” hereunder; or

 

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

 

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

 

(f)            the Trust shall have voluntarily or
involuntarily liquidated, dissolved, wound-up its business or otherwise
terminated its existence except in connection with (i) the distribution of
the Debentures to holders of such Trust Securities in liquidation of their
interests in the Trust, (ii) the 

 

20

 

redemption
of all of the outstanding Trust Securities or (iii) certain mergers, consolidations
or amalgamations, each as permitted by the Declaration.

 

If
an Event of Default occurs and is continuing with respect to the Debentures,
then, and in each and every such case, unless the principal of the Debentures
shall have already become due and payable, either the Trustee or the holders of
not less than 25% in aggregate principal amount of the Debentures then
outstanding hereunder, by notice in writing to the Company (and to the Trustee
if given by Securityholders), may declare the entire principal of the
Debentures and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately
due and payable.

 

The
foregoing provisions, however, are subject to the condition that if, at any
time after the principal of the Debentures shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Debentures and the principal of and
premium, if any, on the Debentures which shall have become due otherwise than
by acceleration (with interest upon such principal and premium, if any, and
Additional Interest) and such amount as shall be sufficient to cover reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and all other amounts due to the Trustee
pursuant to Section 6.6, and if any and all Events of Default under this
Indenture, other than the non-payment of the principal of or premium, if any,
on Debentures which shall have become due by acceleration, shall have been
cured, waived or otherwise remedied as provided herein -- then and in
every such case the holders of a majority in aggregate principal amount of the
Debentures then outstanding, by written notice to the Company and to the
Trustee, may waive all defaults and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereon.

 

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

 

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

 

21

 

out of the property of the Company or any
other obligor on such Debentures wherever situated the moneys adjudged or
decreed to be payable.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

In
any proceedings brought by the Trustee (and also any proceedings involving the
interpretation of any provision of this Indenture to which the Trustee shall be
a party), the Trustee shall be held to 

 

22

 

represent all the holders of the Debentures,
and it shall not be necessary to make any holders of the Debentures parties to
any such proceedings.

 

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

 

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

 

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

 

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

 

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

 

Section 5.4.           Proceedings
by Securityholders.  No
holder of any Debenture shall have any right to institute any suit, action or
proceeding for any remedy hereunder, unless such holder previously shall have
given to the Trustee written notice of an Event of Default with respect to the
Debentures and unless the holders of not less than 25% in aggregate principal
amount of the Debentures then outstanding shall have given the Trustee a
written request to institute such action, suit or proceeding and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity shall have
failed to institute any such action, suit or proceeding.

 

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

 

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

 

23

 

Section 5.6.           Remedies
Cumulative and Continuing; Delay or Omission Not a Waiver.  Except as otherwise provided in
Section 2.6 with respect to the replacement of mutilated, destroyed, lost
or stolen Debentures, all powers and remedies given by this Article V to
the Trustee or to the Securityholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other powers and remedies available
to the Trustee or the holders of the Debentures, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture or otherwise established with respect to
the Debentures, and no delay or omission of the Trustee or of any holder of any
of the Debentures to exercise any right or power accruing upon any 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 an
acquiescence therein; and, subject to the provisions of Section 5.4, every
power and remedy given by this Article V or by law to the Trustee or to
the Securityholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Securityholders.

 

No
delay or omission of the Trustee or any Securityholder to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence
therein.  Every right and remedy given by
this Article or by law to the Trustee or to any Securityholder may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee (in
accordance with its duties under Section 6.1 hereof) or by such holder, as the
case may be.

 

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

 

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

 

24

 

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

 

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

 

ARTICLE
VI.

CONCERNING THE TRUSTEE

 

Section 6.1.           Duties
and Responsibilities of Trustee.  With respect to the holders of Debentures issued hereunder, the
Trustee, prior to the occurrence of an Event of Default with respect to the
Debentures and after the curing or waiving of all Events of Default which may
have occurred, with respect to the Debentures, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture,
and no implied covenants shall be read into this Indenture against the Trustee.  In case an Event of Default with respect to
the Debentures has occurred (which has not been cured or waived), the Trustee
shall exercise such of the rights and powers vested in it by this Indenture,
and use the same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.

 

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

 

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

 

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

 

(2)           in the absence of bad faith on the part
of the Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions 

 

25

 

expressed therein, upon
any certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this Indenture;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)           the Trustee shall not be liable for any
action taken or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Indenture; nothing contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of Default with respect to the
Debentures (that has not been cured or waived) to exercise with respect to
Debentures such of the rights and powers vested in it by this Indenture, and to
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs;

 

26

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 6.6.           Compensation
and Expenses of Trustee.  The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation as shall be
agreed to in writing between the Company and the Trustee (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 incurred or
made by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of
its counsel and of all Persons not regularly in its 

 

27

 

employ) except any such expense, disbursement
or advance as may arise from its negligence or willful misconduct.  The Company also covenants to indemnify each
of the Trustee or any predecessor Trustee (and its officers, agents, directors
and employees) for, and to hold it harmless against, any and all loss, damage,
claim, liability or expense including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or willful misconduct on the
part of the Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability. 
The obligations of the Company under this Section 6.6 to compensate
and indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness
hereunder.  Such additional indebtedness
shall be secured by a lien prior to that of the Debentures upon all property
and funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the holders of particular Debentures.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

28

 

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

 

Section 6.9.           Resignation
or Removal of Trustee

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

29

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

In
case at the time such successor to the Trustee shall succeed to the trusts
created by this Indenture any of the Debentures shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor Trustee, and deliver such 

 

30

 

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

 

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

 

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

 

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

 

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

 

31

 

ARTICLE
VII.

CONCERNING THE SECURITYHOLDERS

 

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

 

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

 

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

 

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

 

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

 

32

 

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

 

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

 

ARTICLE
VIII.

SECURITYHOLDERS’ MEETINGS

 

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

 

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

 

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

 

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

 

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

 

33

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 8.6.           Voting.  The vote upon any resolution submitted to any
meeting of holders of Debentures with respect to which such meeting is being
held shall be by written ballots on which shall be subscribed the signatures of
such holders or of their representatives by proxy and the serial number or
numbers of the Debentures held or represented by them.  The permanent chairman of the meeting shall 

 

34

 

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

 

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

 

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

 

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

 

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

 

ARTICLE
IX.

SUPPLEMENTAL INDENTURES

 

Section 9.1.           Supplemental
Indentures without Consent of Securityholders.  The Company, when authorized by a Board
Resolution, and the Trustee may from time to time and at any time 

 

35

 

enter into an indenture or indentures
supplemental hereto, without the consent of the Securityholders, for one or
more of the following purposes:

 

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

 

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

 

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

 

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

 

(e)           to evidence and provide for the
acceptance of appointment hereunder by a successor Trustee with respect to the
Debentures and to add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee;

 

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

 

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

 

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

 

36

 

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

 

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

 

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

 

Promptly
after the execution by the Company and the Trustee of any supplemental
indenture pursuant to the provisions of this Section, the Trustee shall transmit
by mail, first class postage prepaid, a notice, prepared by the Company,
setting forth in general terms the substance of such supplemental indenture, to
the Securityholders as their names and addresses appear upon the Debenture
Register.  Any failure of the Trustee to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture.

 

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

 

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

 

37

 

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

 

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

 

ARTICLE
X.

REDEMPTION OF SECURITIES

 

Section 10.1.        Optional
Redemption.  The
Company shall have the right to redeem the Debentures, in whole or in part, but
in all cases in a principal amount with integral multiples of $1,000.00, on any
March 4, June 4, September 4 or December 4 on or after December 4, 2007 (a “Redemption
Date”), at the Optional Redemption Price.

 

Section 10.2.        Special
Event Redemption.  If
a Special Event shall occur and be continuing, the Company shall have the right
to redeem the Debentures in whole, but not in part, at any Interest Payment
Date, within 120 days following the occurrence of such Special Event (the
“Special Redemption Date”) at the Special Redemption Price.

 

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

 

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

 

38

 

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

 

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

 

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

 

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

 

ARTICLE
XI.

CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

 

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

 

39

 

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

 

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

 

ARTICLE
XII.

SATISFACTION AND DISCHARGE OF INDENTURE

 

Section 12.1.        Discharge
of Indenture.  When

 

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

 

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

 

40

 

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

 

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

 

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

 

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

 

ARTICLE
XIII.

IMMUNITY OF INCORPORATORS, STOCKHOLDERS,

OFFICERS AND DIRECTORS

 

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

 

41

 

ARTICLE
XIV.

MISCELLANEOUS PROVISIONS

 

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

 

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

 

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

 

Section 14.4.        Addresses
for Notices, etc.    Any notice, consent, direction, request, authorization, waiver or
demand which by any provision of this Indenture is required or permitted to be
given, made, furnished or served by the Trustee or by the Securityholders on or
to the Company may be given or served in writing by being deposited postage
prepaid by registered or certified mail in a post office letter box addressed
(until another address is filed by the Company, with the Trustee for the
purpose) to the Company, 140 Broadway, 47th Floor, New York, NY 10005,
Attention:  Adam R. Willkomm.  Any notice, consent, direction, request,
authorization, waiver or demand by any Securityholder or the Company to or upon
the Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the office of the Trustee, addressed
to the Trustee, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103
Attention: Vice President, Corporate Trust Department, with a copy to State
Street Bank and Trust Company, P.O. Box 778, Boston, Massachusetts 02102-0778,
Attention:  Paul D. Allen, Corporate
Trust Department.  Any notice, consent,
direction, request, authorization, waiver or demand on or to any Securityholder
shall be deemed to have been sufficiently given or made, for all purposes, if
given or made in writing at the address set forth in the Debenture Register.

 

Section 14.5.        Governing
Law.  This Indenture
and each Debenture shall be deemed to be a contract made under the law of the
State of New York, and for all purposes shall be governed by and construed in
accordance with the law of said State, without regard to conflict of laws
principles thereof, except with respect to authorization and execution by or on
behalf of the Company which are required to be governed by the laws of
Bermuda.f

 

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

 

Each
certificate or opinion provided for in this Indenture and delivered to the
Trustee with respect to compliance with a condition or covenant provided for in
this Indenture shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express an 

 

42

 

informed opinion as to whether or not such
covenant or condition has been complied with; and (4) a statement as to
whether or not in the opinion of such person, such condition or covenant has
been complied with.

 

Section 14.7.        Non-Business
Days.  In any case
where the date of payment of interest on or principal of the Debentures will be
a day that is not a Business Day, the payment of such interest on or principal
of the Debentures need not be made on such date but may be made on the next
succeeding Business Day, except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the original date of payment, and no interest shall accrue for the period
from and after such date.

 

Section 14.8.        Table
of Contents, Headings, etc.  The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.

 

Section 14.9.        Execution
in Counterparts.  This
Indenture may be executed in any number of counterparts, each of which shall be
an original, but such counterparts shall together constitute but one and the
same instrument.

 

Section 14.10.      Separability.  In case any one or more of the provisions
contained in this Indenture or in the Debentures shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Indenture or of such Debentures, but this Indenture and such Debentures shall
be construed as if such invalid or illegal or unenforceable provision had never
been contained herein or therein.

 

Section 14.11.      Assignment.  The Company will have the right at all times
to assign any of its rights or obligations under this Indenture to a direct or
indirect wholly owned Subsidiary of the Company, provided that, in the event of
any such assignment, the Company will remain liable for all such
obligations.  Subject to the foregoing,
this Indenture is binding upon and inures to the benefit of the parties hereto
and their respective successors and assigns. 
This Indenture may not otherwise be assigned by the parties hereto.

 

Section 14.12.      Acknowledgment
of Rights.  The
Company agrees that, with respect to any Debentures held by the Trust or the
Institutional Trustee of the Trust, if the Institutional Trustee of the Trust
fails to enforce its rights under this Indenture as the holder of Debentures
held as the assets of such Trust after the holders of a majority in Liquidation
Amount of the Capital Securities of such Trust have so directed such
Institutional Trustee, a holder of record of such Capital Securities may, to
the fullest extent permitted by law, institute legal proceedings directly
against the Company to enforce such Institutional Trustee’s rights under this
Indenture without first instituting any legal proceedings against such trustee
or any other Person.  Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest (or premium, if
any) or principal on the Debentures on the date such interest (or premium, if
any) or principal is otherwise payable (or in the case of redemption, on the
redemption date), the Company agrees that a holder of record of Capital Securities
of the Trust may directly institute a proceeding against the Company for
enforcement of payment to such holder directly of the principal of (or premium,
if any) or interest on the Debentures having an aggregate principal amount
equal to the aggregate Liquidation Amount of the Capital Securities of such
holder on or after the respective due date specified in the Debentures.

 

43

 

Section 14.13.      Submission
to Jurisdiction; Appointment of Agent for Service.  In further consideration of the agreement of
the Trustee herein contained, the Company agrees and covenants as follows:

 

The
Company irrevocably agrees that any legal suit, action or proceeding against
the Company brought by the Trustee arising out of or based upon this Indenture
or the transactions contemplated hereby may be instituted in any United States
Federal or New York State court in the Borough of Manhattan, The City of New
York, State of New York (a “New York Court”), and irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any such
proceeding, irrevocably waives any objection based on the absence of a
necessary or indispensable party in any such proceeding and irrevocably submits
to the non-exclusive jurisdiction of such courts in any such suit, action or
proceeding.  The Company irrevocably
waives any immunity to jurisdiction to which it may otherwise be entitled or
become entitled (including immunity to pre-judgment attachment and execution)
in any legal suit, action or proceeding against it arising out of this
Indenture or the transactions contemplated hereby which is instituted in any
New York Court or in any foreign court. 
To the extent permitted by law, the Company hereby waives any objection
to the enforcement by any competent foreign court of any judgment validly
obtained in any such proceeding.  The
Company designates and appoints CT Corporation System in New York, New York as
its authorized agent (the “Authorized Agent”) upon which process may be served
in any such action arising out of or based on this Indenture or the
transactions contemplated hereby which may be instituted in any New York Court
by the Trustee, expressly consents to the non-exclusive jurisdiction of any
such court in respect of any such action, and waives any other requirements of
or objections to personal jurisdiction with respect thereto.  Such appointments shall be irrevocable.  The Company represents and warrants that its
Authorized Agent has agreed to act as said agent for service of process and the
Company agrees to take any and all action, including the filing of any and all
documents and instruments, that may be necessary to continue such appointment
in full force and effect as aforesaid. 
Service of process upon the Authorized Agent and written notice of such
service of process to it shall be deemed, in every respect, effective service
of process upon the Company. 
Notwithstanding the foregoing, any action based on this Indenture or the
transactions contemplated hereby may be instituted by the Trustee in any
competent foreign court.

 

The
provisions of this Section 14.13 shall survive any termination of this
Indenture, in whole or in part.

 

Section 14.14.      Judgment
Currency.  The
Company agrees, to the fullest extent that it may effectively do so under
applicable law, that (a) if for the purpose of obtaining judgment in any court
it is necessary to convert the sum due in respect of the principal of, and
premium, interest, and Additional Sums, if any, on the Debentures (the “Required
Currency”) into a currency in which a judgment will be rendered (the “Judgment
Currency”), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of New
York the requisite amount of the Required Currency with the Judgment Currency
on the Business Day preceding the day on which a final unappealable judgment is
given and (b) its obligations under this Indenture to make payments in the
Required Currency (i) shall not be discharged or satisfied by any tender, or
any recovery pursuant to any judgment (whether or not entered into in
accordance with clause (a)), in any currency other than the Required Currency,
except to the extent that such tender or recovery shall result in the actual
receipt, by the payee, of the full amount of the Required Currency expressed to
be payable in respect of such payments, (ii) shall be enforceable as an
alternative or additional cause of action for the purpose of recovering in the
Required Currency the amount, if any, by which such actual receipt shall fall
short of the full amount of the Required Currency so expressed to be payable
and (iii) shall not be affected by judgment being obtained for any other sum
due under this Indenture.

 

44

 

Section 14.15.      Waiver
of Immunity.  To the
extent that the Company has or hereafter may acquire any immunity (sovereign or
otherwise) from any legal action, suit or proceeding, from jurisdiction of any
court or from set-off or any legal process (whether service or notice,
attachment in aid or otherwise) with respect to itself or any of its property,
the Company hereby irrevocably waives and agrees not to plead or claim such
immunity in respect of its obligations under this Indenture.

 

ARTICLE
XV.

SUBORDINATION OF DEBENTURES

 

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

 

The
payment by the Company of the principal of, and premium, if any, and interest
on all Debentures shall, to the extent and in the manner hereinafter set forth,
be subordinated and junior in right of payment to the prior payment in full of
all Senior Indebtedness of the Company, whether outstanding at the date of this
Indenture or thereafter incurred.

 

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

 

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

 

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

 

Section 15.3.        Liquidation,
Dissolution, Bankruptcy.  Upon any payment by the Company or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company,
on account of the principal (and premium, if any) or interest on the
Debentures.  Upon any such dissolution or
winding-up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, which the Securityholders or the Trustee would be
entitled to receive from the Company, except for the provisions of this
Article XV, shall be paid by the Company, or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Securityholders or by the Trustee under this Indenture
if 

 

45

 

received by them or it, directly to the
holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money’s worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Securityholders
or to the Trustee.

 

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

 

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

 

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

 

46

 

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

 

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

 

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

 

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

 

The
Trustee, subject to the provisions of Article VI of this Indenture, shall
be entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness (or a trustee
or representative on behalf of such holder), to establish that such notice has
been given by a holder of such Senior Indebtedness or a trustee or
representative on behalf of any such holder or holders.  In the event that the Trustee determines in
good faith that further evidence is 

 

47

 

required with respect to the right of any
Person as a holder of such Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XV, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of such Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article XV, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.

 

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

 

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

 

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

 

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

 

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

 

Signatures appear on the following page

 

48

 

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

 

	
   

  	
  AMERICAN CAPITAL ACCESS HOLDINGS 

  LIMITED

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STATE STREET BANK AND TRUST COMPANY

  OF CONNECTICUT, NATIONAL ASSOCIATION,

  as Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
							

 

49

 

FORM OF JUNIOR SUBORDINATED DEBENTURE

 

[FORM OF FACE OF SECURITY]

 

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

 

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

 

A-1-1

 

BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR
ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH
PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO
APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

 

THIS
SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN
AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $500,000.00 AND MULTIPLES OF
$1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED
TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF
LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
WHATSOEVER.

 

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

 

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

 

Floating Rate Junior Subordinated Deferrable Interest
Debenture

 

of

 

American Capital Access Holdings Limited

 

December 4, 2002

 

American
Capital Access Holdings Limited, a corporation duly organized and existing
under the laws of the State of Bermuda (the “Company” which term includes any
successor Person under the Indenture hereinafter referred to), for value
received promises to pay to State Street Bank and Trust Company of Connecticut,
National Association, not in its individual capacity but solely as
Institutional Trustee for ACA Statutory Trust I (the “Holder”) or registered
assigns, the principal sum of eighteen million forty-two thousand dollars
($18,042,000.00) on December 4, 2032, and to pay interest on said principal sum
from March 4, 2003, or from the most recent interest payment date (each such
date, an “Interest Payment Date”) to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears on
March 4, June 4, September 4 and December 4 of each year commencing March 4,
2003, at an annual rate equal to 5.42375% beginning on (and including) the date
of original issuance and ending on (but excluding) March 4, 2003 and at an
annual rate for each successive period beginning on (and including) March 4,
2003, and each succeeding Interest Payment Date, and ending on (but excluding)
the next succeeding Interest Payment Date (each a “Distribution Period”), equal
to 3-Month LIBOR, determined as described below, plus 4.00% (the “Coupon
Rate”); provided, however, that prior to December 4, 2007, the
Coupon Rate shall not exceed 12.50%, applied to the principal amount hereof,
until the principal hereof is paid or duly provided for or made available for
payment, and on any overdue principal and (without duplication) on any overdue
installment of interest at the same rate per annum, compounded quarterly, from
the dates such amounts are due until they are paid or made available for
payment.  The amount of interest payable
for any period will be computed on the basis of the actual number of days in
the Distribution Period concerned divided by 360.  In the event that any date on which interest
is payable on this Debenture is not a Business Day, then a payment of the
interest payable on such date will be made on the next succeeding day which is
a Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in 

 

A-1-2

 

the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date the payment was
originally payable.  The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Debenture (or one or more Predecessor Securities) is
registered at the close of business on the regular record date for such
interest installment, which shall be fifteen days prior to the day on which the
relevant Interest Payment Date occurs. 
Any such interest installment not so punctually paid or duly provided
for shall forthwith cease to be payable to the Holder on such regular record date
and may be paid to the Person in whose name this Debenture (or one or more
Predecessor Securities) is registered at the close of business on a special
record date.

 

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

 

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

 

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

 

The
principal of and interest on this Debenture shall be payable at the office or
agency of the Trustee (or other paying agent appointed by the Company)
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public 

 

A-1-3

 

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

 

So
long as no Event of Default has occurred and is continuing, the Company shall
have the right, from time to time, and without causing an Event of Default, to
defer payments of interest on the Debentures by extending the interest payment
period on the Debentures at any time and from time to time during the term of
the Debentures, for up to 20 consecutive quarterly periods (each such
extended interest payment period, an “Extension Period”), during which
Extension Period no interest (including Additional Interest) shall be due and
payable.  No Extension Period may end on
a date other than an Interest Payment Date. 
At the end of any such Extension Period the Company shall pay all
interest then accrued and unpaid on the Debentures (together with Additional
Interest thereon); provided, however, that no Extension Period
may extend beyond the Maturity Date; provided  further, however,
that during any such Extension Period, the Company shall not and shall not
permit any Affiliate to (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect
to, any of the Company’s or such Affiliate’s capital stock (other than payments
of dividends or distributions to the Company) or make any guarantee payments
with respect to the foregoing or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the
Debentures (other than, with respect to clauses (i) and (ii) above,
(a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan
or other similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of
capital stock of the Company (or securities convertible into or exercisable for
such capital stock) as consideration in an acquisition transaction entered into
prior to the applicable Extension Period, (b) as a result of any exchange
or conversion of any class or series of the Company’s capital stock (or any
capital stock of a subsidiary of the Company) for any class or series of the
Company’s capital stock or of any class or series of the Company’s indebtedness
for any class or series of the Company’s capital stock, (c) the purchase
of fractional interests in shares of the Company’s capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholders’ rights plan, or the issuance of rights, stock
or other property under any stockholders’ rights plan, or the redemption or
repurchase of rights pursuant thereto, (e) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock
and any cash payments in lieu of fractional shares issued in connection
therewith, or (f) payments under the Capital Securities Guarantee).  Prior to the termination of any Extension
Period, the Company may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof
shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date.  Upon the termination of
any Extension Period and upon the payment of all accrued and unpaid interest
and Additional Interest, the Company may commence a new Extension Period, subject
to the foregoing requirements.  No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest.  The Company must
give the Trustee notice of its election to begin or extend such Extension
Period at least 5 Business Days prior to the earlier of (i) the date
interest on the Debentures would have been payable except for the election to
begin such Extension Period or (ii) the date such interest is payable, but
in any event not less than 5 Business Days prior to such record date.

 

A-1-4

 

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

 

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

 

Capitalized
terms used and not defined in this Debenture shall have the meanings assigned
in the Indenture dated as of the date of original issuance of this Debenture
between the Trustee and the Company.

 

 

Signatures appear on the following page.

 

A-1-5

 

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

 

	
   

  	
  AMERICAN CAPITAL ACCESS HOLDINGS

  LIMITED

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

CERTIFICATE OF AUTHENTICATION

 

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

 

	
   

  	
  STATE STREET BANK AND TRUST COMPANY

  	
   

  
	
   

  	
  OF CONNECTICUT, NATIONAL ASSOCIATION,

  	
   

  
	
   

  	
  as Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized
  Officer

  	
   

  

 

A-1-6Exhibit
10.12

 

 

ACA
CAPITAL HOLDINGS, INC.

 

AMENDED
AND RESTATED 2004 STOCK INCENTIVE PLAN

 

(as
amended and restated September 30, 2004

and formerly known as the American Capital Access

Holdings,
Incorporated Omnibus Incentive Compensation Plan)

 

 

 

 

TABLE OF CONTENTS

 

 

 

	
   

  	
   

  	
  Page 

  
	
  1.

  	
  PURPOSE
  

  	
  1

  
	
  2.

  	
  DEFINITIONS

  	
  1

  
	
  3.

  	
  ADMINISTRATION OF THE PLAN
  

  	
  5

  
	
   

  	
  3.1.

  	
  Board 

  	
  5

  
	
   

  	
  3.2.

  	
  Committee 

  	
  5

  
	
   

  	
  3.3.

  	
  Terms of Awards 

  	
  5

  
	
   

  	
  3.4.

  	
  Deferral Arrangement 

  	
  6

  
	
   

  	
  3.5.

  	
  No Liability 

  	
  6

  
	
  4.

  	
  STOCK SUBJECT TO THE PLAN 

  	
  7

  
	
  5.

  	
  EFFECTIVE DATE, DURATION
  AND AMENDMENTS 

  	
  7

  
	
   

  	
  5.1.

  	
  Effective Date 

  	
  7

  
	
   

  	
  5.2.

  	
  Term 

  	
  7

  
	
   

  	
  5.3.

  	
  Amendment and Termination
  of the Plan 

  	
  7

  
	
  6.

  	
  AWARD ELIGIBILITY AND
  LIMITATIONS 

  	
  8

  
	
   

  	
  6.1.

  	
  Service Providers and
  Other Persons 

  	
  8

  
	
   

  	
  6.2.

  	
  Successive Awards 

  	
  8

  
	
   

  	
  6.3.

  	
  Limitations on Incentive
  Stock Options 

  	
  8

  
	
   

  	
  6.4.

  	
  Stand-Alone, Additional,
  Tandem, and Substitute Awards 

  	
  8

  
	
  7.

  	
  AWARD AGREEMENT 

  	
  9

  
	
  8.

  	
  TERMS AND CONDITIONS OF
  OPTIONS 

  	
  9

  
	
   

  	
  8.1.

  	
  Option Price 

  	
  9

  
	
   

  	
  8.2.

  	
  Vesting 

  	
  9

  
	
   

  	
  8.3.

  	
  Term 

  	
  9

  
	
   

  	
  8.4.

  	
  Termination of Service 

  	
  10

  
	
   

  	
  8.5.

  	
  Limitations on Exercise of
  Option 

  	
  10

  
	
   

  	
  8.6.

  	
  Method of Exercise 

  	
  10

  
	
   

  	
  8.7.

  	
  Rights of Holders of
  Options 

  	
  10

  
	
   

  	
  8.8.

  	
  Delivery of Stock
  Certificates 

  	
  10

  
	
   

  	
  8.9.

  	
  Reload Options 

  	
  11

  
	
  9.

  	
  TRANSFERABILITY OF OPTIONS
  

  	
  11

  
	
   

  	
  9.1.

  	
  Transferability of Options
  

  	
  11

  
	
   

  	
  9.2.

  	
  Family Transfers 

  	
  11

  
	
  10. 

  	
  RESTRICTED STOCK AND STOCK
  UNITS 

  	
  11

  
	
   

  	
  10.1. 

  	
  Grant of Restricted Stock
  or Stock Units 

  	
  11

  
	
   

  	
  10.2. 

  	
  Restrictions 

  	
  12

  
	
   

  	
  10.3. 

  	
  Restricted Stock
  Certificates 

  	
  12

  
	
   

  	
  10.4. 

  	
  Rights of Holders of
  Restricted Stock 

  	
  12

  
	
   

  	
  10.5. 

  	
  Rights of Holders of Stock
  Units 

  	
  12

  
	
   

  	
   

  	
  10.5.1.

  	
  Voting and Dividend Rights
  

  	
  12

  
	
   

  	
    

  	
  10.5.2.

  	
  Creditor’s Rights

  	
  13

  
	
   

  	
  10.6.  

  	
  Termination of Service

  	
  13

  
	
   

  	
  10.7. 

  	
  Purchase of Restricted
  Stock 

  	
  13

  

 

 

 

i

 

	
   

  	
  10.8. 

  	
  Delivery of Stock

  	
  13

  
	
  11. 

  	
  UNRESTRICTED STOCK AWARDS 

  	
  13

  
	
  12.

  	
  FORM OF PAYMENT FOR
  OPTIONS AND RESTRICTED STOCK 

  	
  14

  
	
   

  	
  12.1. 

  	
  General Rule 

  	
  14

  
	
   

  	
  12.2. 

  	
  Surrender of Stock 

  	
  14

  
	
   

  	
  12.3. 

  	
  Cashless Exercise 

  	
  14

  
	
   

  	
  12.4.  

  	
  Other Forms of Payment

  	
  14

  
	
  13.

  	
  DIVIDEND EQUIVALENT RIGHTS
  

  	
  14

  
	
   

  	
  13.1. 

  	
  Dividend Equivalent Rights
  

  	
  14

  
	
   

  	
  13.2. 

  	
  Termination of Service 

  	
  15

  
	
  14. 

  	
  PERFORMANCE AND ANNUAL
  INCENTIVE AWARDS 

  	
  15

  
	
   

  	
  14.1. 

  	
  Performance Conditions 

  	
  15

  
	
   

  	
  14.2.  

  	
  Performance or Annual
  Incentive Awards Granted to Designated Covered Employees

  	
  15

  
	
   

  	
   

  	
  14.2.1.

  	
  Performance Goals
  Generally 

  	
  16

  
	
   

  	
   

  	
  14.2.2.

  	
  Business Criteria 

  	
  16

  
	
   

  	
   

  	
  14.2.3.

  	
  Timing For Establishing
  Performance Goals

  	
  16

  
	
   

  	
   

  	
  14.2.4.

  	
  Performance or Annual
  Incentive Award Pool

  	
  16

  
	
   

  	
   

  	
  14.2.5.

  	
  Settlement of Performance
  or Annual Incentive Awards; Other Terms

  	
  16

  
	
   

  	
  14.3. 

  	
  Written Determinations 

  	
  17

  
	
   

  	
  14.4. 

  	
  Status of Section 14.2
  Awards Under Code Section 162(m) 

  	
  17

  
	
  15.

  	
  PARACHUTE LIMITATIONS 

  	
  17

  
	
  16.

  	
  REQUIREMENTS OF LAW 

  	
  18

  
	
   

  	
  16.1. 

  	
  General 

  	
  18

  
	
   

  	
  16.2.  

  	
  Rule 16b-3

  	
  19

  
	
  17. 

  	
  EFFECT OF CHANGES IN
  CAPITALIZATION 

  	
  19

  
	
   

  	
  17.1. 

  	
  Changes in Stock 

  	
  19

  
	
   

  	
  17.2. 

  	
  Reorganization in Which
  the Company Is the Surviving Entity Which does not Constitute a Corporate
  Transaction

  	
  19

  
	
   

  	
  17.3. 

  	
  Corporate Transaction 

  	
  20

  
	
   

  	
  17.4. 

  	
  Adjustments

  	
  21

  
	
   

  	
  17.5. 

  	
  No Limitations on Company

  	
  21

  
	
  18. 

  	
  GENERAL PROVISIONS

  	
  21

  
	
   

  	
  18.1. 

  	
  Disclaimer of Rights

  	
  21

  
	
   

  	
  18.2. 

  	
  Nonexclusively of the Plan

  	
  22

  
	
   

  	
  18.3. 

  	
  Withholding Taxes

  	
  22

  
	
   

  	
  18.4. 

  	
  Captions

  	
  22

  
	
   

  	
  18.5. 

  	
  Other Provisions

  	
  22

  
	
   

  	
  18.6. 

  	
  Number And Gender

  	
  22

  
	
   

  	
  18.7. 

  	
  Severability

  	
  23

  
	
   

  	
  18.8.  

  	
  Governing Law

  	
  23

  

 

 

ii

 

ACA
CAPITAL HOLDINGS, INC.

 

AMENDED
AND RESTATED 2004 STOCK INCENTIVE PLAN

 

(as amended and restated
September 30, 2004)

 

                ACA
Capital Holdings, Inc., a Delaware corporation (the “Company”), sets forth
herein the terms of its amended and restated 2004 Stock Incentive Plan (the “Plan”),
as follows:

 

1.             PURPOSE

 

                The Plan is intended to enhance the Company’s and its
Affiliates’ (as defined herein) ability to attract and retain highly qualified officers,
directors, key employees, and other persons, and to motivate such officers, directors, key
employees, and other persons to serve the Company and its Affiliates and to
expend maximum effort to improve the business results and earnings of the
Company, by providing to such persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To
this end, the Plan provides for the grant of stock options, restricted stock, stock units, unrestricted stock, dividend
equivalent rights and cash awards. Any of these awards may, but need not, be
made as performance incentives to reward attainment of annual or long-term
performance goals in accordance with the terms hereof. Stock options granted
under the Plan may be non-qualified stock options or incentive stock options,
as provided herein.

 

2.             DEFINITIONS

 

                For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:

 

                2.1           “Affiliate”
means, with respect to the Company, any company or other trade or business that
controls, is controlled by or is under common control with the Company within the
meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.

 

                2.2           “Annual Incentive Award”
means an Award made subject to attainment of performance goals (as described in Section 14) over a performance period of up to one year
(the fiscal year, unless otherwise specified by the Committee).

 

                2.3           “Award” means a grant of an Option, Restricted Stock,
Unrestricted Stock, Stock
Unit, Dividend Equivalent Rights, or cash award under the Plan.

 

                2.4           “Award Agreement” means
the written agreement between the Company and a Grantee that evidences and sets
out the terms and conditions of an Award.

 

                2.5
          “Benefit
Arrangement” shall have the meaning set forth in Section 15  hereof.

 

 

 

2.6           “Board” means the Board of Directors of the Company.

 

2.7           “Cause” means, as determined by the Board and unless
otherwise provided in an applicable agreement with the Company or an Affiliate,
(i) gross negligence or willful misconduct in connection with the performance
of duties; (ii) conviction of a criminal offense (other than minor traffic offenses);
or (iii) material breach of any term of any employment, consulting or other
services, confidentiality, intellectual property or non-competition agreements,
if any, between the Service Provider and the Company or an Affiliate.

 

2.8           “Code” means
the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

 

2.9           “Committee” means a committee of, and designated from time
to time by resolution of, the Board, which shall be constituted as provided in Section 3.2.

 

2.10         “Company” means
ACA Capital Holdings, Inc.

 

2.11         “Corporate Transaction”
means (i) the dissolution or liquidation of the Company or a merger,
consolidation, or reorganization of the Company with one or more other entities in which the Company is
not the surviving entity, (ii) a sale of substantially all of the assets of the
Company to another person or entity, or (iii) any transaction (including without
limitation a merger or reorganization in which the Company is the surviving
entity) which results in any person or entity (other than persons who are
shareholders or Affiliates immediately prior to the transaction) owning 50% or more of the
combined voting power of all classes of stock of the Company.

 

2.12         “Covered Employee”
means a Grantee who is a “covered employee” within the meaning of Section 162(m)(3) of the Code.

 

2.13         “Disability”
means the Grantee is unable to perform each of the essential duties of such
Grantee’s position by reason of a medically determinable physical or mental impairment which is potentially permanent
in character or which can be expected to last for a continuous period of
not less than 12 months; provided, however, that, with respect to rules regarding expiration of an
Incentive Stock Option following termination of the Grantee’s Service,
Disability shall mean the Grantee is unable to engage in any substantial
gainful activity by reason of a medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can be
expected to last for a continuous
period of not less than 12 months.

 

2.14         “Dividend Equivalent” means a right, granted to a Grantee
under Section 13 hereof, to receive cash,
Stock, other Awards or other property equal in value to dividends paid with
respect to a specified number of shares of Stock, or other periodic payments.

 

 

2

 

 

                2.15         “Effective Date” means March 1, 2001.

 

                2.16         “Exchange Act” means the Securities Exchange Act of 1934, as
now in effect or as
hereafter amended.

 

                2.17         “Fair Market Value”
means the value of a share of Stock, determined as follows: if on the Grant
Date or other determination date the Stock is listed on an established national
or regional stock exchange, is admitted to quotation on The Nasdaq Stock
Market, Inc. or is publicly traded on an established securities market, the
Fair Market Value of a share of Stock shall be the closing price of the Stock
on such exchange or in such market (if there is more than one such
exchange or market the Board shall determine the appropriate exchange or
market) on the Grant Date or such other determination date (or if there is no
such reported closing price, the Fair Market Value shall be the mean between
the highest bid and lowest asked prices or between the high and low sale prices
on such trading day) or, if no sale of Stock is reported for such trading day,
on the next preceding day on which any sale shall have been reported. If the
Stock is not listed
on such an exchange, quoted on such system or traded on such a market, Fair Market Value
shall be the value of the Stock as determined by the Board in good faith.

 

                2.18         “Family
Member” means a person who is a spouse, former spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, fathering-law,
son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law,
including adoptive relationships, of the Grantee, any person sharing the
Grantee’s household (other than a tenant or employee), a trust in which any one
or more of these persons have more than fifty percent of the beneficial
interest, a foundation in which any one or more of these persons (or the Grantee) control the
management of assets, and any other entity in which one or more of these persons
(or the Grantee) own more than fifty percent of the voting 

interests.

 

                2.19
        “Grant Date”
means, as determined by the Board or authorized Committee, the latest to
occur of (i) the date as of which the Board approves an Award, (ii) the date on
which the recipient of an Award first becomes eligible to receive an Award
under Section 6 hereof, or (iii) such other
date as may be specified by the Board.

 

                2.20         “Grantee” means
a person who receives or holds an Award under the Plan.

 

                2.21         “Incentive Stock Option”
means an “incentive stock option” within the meaning of Section 422 of the
Code, or the corresponding provision of any subsequently enacted tax statute,
as amended from time to time.

 

                2.22         “Non-qualified Stock Option” means an Option that is not an
Incentive Stock Option.

 

                2.23         “Option” means an option to purchase one or more shares of
Stock pursuant to the
Plan.

 

                2.24         “Option Price”
means the exercise price for each share of Stock subject to an Option.

 

3

 

                2.25
        “Other
Agreement” shall have the meaning set forth in Section 15
hereof.

 

                2.26         “Outside Director” means a member of the Board who is not an
offer or employee of the Company.

 

                2.27         “Performance Award” means an Award made subject to the
attainment of performance goals (as described in Section 14)
over a performance period of up to ten (10) years.

 

                2.28
        “Plan”
means this ACA Capital Holdings, Inc. Amended and Restated 2004 Stock Incentive
Plan.

 

                2.29
        “Purchase
Price” means the purchase price for each share of Stock pursuant to
a grant of Restricted Stock or Unrestricted Stock.

 

                2.30         “Reporting Person” means a person who is required to file
reports under Section 16(a) of the Exchange Act.

 

                2.31         “Restricted Stock” means shares of Stock, awarded to a
Grantee pursuant to Section 10 hereof.

 

                2.32         “Securities Act” means the Securities Act of 1933, as now in
effect or as hereafter
amended.

 

                2.33         “Service” means
service as a Service Provider to the Company or an Affiliate. Unless otherwise
stated in the applicable Award Agreement, a Grantee’s change in position or
duties shall not result in interrupted or terminated Service, so long as such
Grantee continues to be a Service Provider to the Company or an Affiliate.
Subject to the preceding sentence, whether a termination of Service shall have
occurred for purposes of the Plan shall be determined by the Board, which
determination shall be final, binding and conclusive.

 

                2.34         “Service Provider”
means an employee, offer or director of the Company or an Affiliate, or a
consultant or adviser currently providing services to the Company or an Affiliate.

 

                2.35         “Stock” means the common stock, par value $.10 per share, of
the Company.

 

                2.36         “Stock Unit” means a bookkeeping entry representing the
equivalent of shares
of Stock, awarded to a Grantee pursuant to Section 10
hereof.

 

                2.37         “Subsidiary”
means any “subsidiary corporation” of the Company within the meaning of Section
424(f) of the Code.

 

                2.38         “Termination Date” means the date upon which an Option shall
terminate or expire,
as set forth in Section 8.3 hereof.

 

4

 

                2.39         “Ten Percent Stockholder” means an individual who owns more
than ten percent (10%) of the total combined voting power of all
classes of outstanding stock of the Company, its parent or any of its
Subsidiaries. In determining stock ownership, the attribution rules of Section
424(d) of the Code shall be applied.

 

                2.40         “Unrestricted Stock” means an Award pursuant to Section 11 hereof.

 

3.             ADMINISTRATION OF THE PLAN

 

                3.1.         Board

 

                The
Board shall have such powers and authorities related to the administration of
the Plan as are consistent with the Company’s certificate of incorporation and
by-laws and applicable law. The Board shall have full power and authority to
take all actions and to make all determinations required or provided for under
the Plan, any Award or any Award Agreement, and shall have full power and
authority to take all such other actions and make all such other determinations
not inconsistent with the specific terms and provisions of the Plan that the
Board deems to be necessary or appropriate to the administration of the Plan, any Award or
any Award Agreement. All such actions and determinations shall be by the affirmative
vote of a majority of the members of the Board present at a meeting or by unanimous consent of the Board executed
in writing in accordance with the Company’s certificate of incorporation
and by-laws and applicable law. The interpretation and construction by the Board of any
provision of the Plan, any Award or any Award Agreement shall be final,
binding and conclusive.

 

                3.2.         Committee.

 

                The Board from time to time may delegate to the
Committee such powers and authorities related to the administration and
implementation of the Plan, as set forth in Section 3.1
above and other applicable provisions, as the Board shall determine, consistent
with the certificate of incorporation and by-laws of the Company and applicable
law. In the event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be
taken by or determination to be made by the Board, such action may be taken or
such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive.

 

                3.3.         Terms of Awards.

 

                Subject to the other terms and conditions of the
Plan, the Board shall have full and final authority to:

 

                (i)            designate Grantees,

 

                (ii)           determine the type or types of Awards
to be made to a Grantee,

 

                (iii)          determine
the number of shares of Stock to be subject to an Award,

 

 

5

 

                (iv)          establish the terms
and conditions of each Award (including, but not limited to, the exercise
price of any Option, the nature and duration of any restriction or condition
(or provision for lapse thereof) relating to the vesting, exercise, transfer,
or forfeiture of an Award
or the shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options),

 

                (v)           prescribe
the form of each Award Agreement evidencing an Award, and

 

                (vi)          amend,
modify, or supplement the terms of any outstanding Award. Such authority specifically
includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to modify
Awards to eligible individuals who are foreign nationals or are individuals who
are employed outside the United States to recognize differences in local law,
tax policy, or custom.

 

                As a condition
to any subsequent Award, the Board shall have the right, at its discretion, to
require Grantees to return to the Company Awards previously made under the
Plan. Subject to the terms and conditions of the Plan, any such new Award shall
be upon such terms and conditions as are specified by the Board at the time the
new Award is made. The Board shall have the right, in its discretion, to make
Awards in substitution or exchange for any other award under another plan of
the Company, any Affiliate, or any business entity to be acquired by the Company or an
Affiliate. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of actions taken by the
Grantee in violation or breach of or in conflict with any employment agreement,
non-competition agreement, any agreement prohibiting solicitation of
employees or clients of the Company or any Affiliate thereof or any
confidentiality obligation with respect to the Company or any Affiliate thereof
or otherwise in competition with the Company or any Affiliate thereof, to the
extent specified in such Award Agreement applicable to the Grantee.
Furthermore, the Company may annul an Award if the Grantee is an employee of
the Company or an Affiliate thereof and is terminated for Cause as defined in
the applicable Award Agreement or the Plan, as applicable. The grant of any
Award shall be contingent upon the Grantee executing the appropriate Award Agreement.

 

                3.4.         Deferral Arrangement.

 

                The
Board may permit or require the deferral of any award payment into a deferred compensation
arrangement, subject to such rules and procedures as it may establish, which may include provisions for the
payment or crediting of interest or dividend equivalents, including converting
such credits into deferred Stock equivalents and restricting deferrals to
comply with hardship distribution rules affecting 401(k) plans.

 

                3.5.         No Liability.

 

                No
member of the Board or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award or Award
Agreement.

 

6

 

4.             STOCK SUBJECT TO THE PLAN

 

                Subject to adjustment as provided in Section 17 hereof, the number of shares of Stock available
for issuance under the Plan shall be seven hundred and one thousand nine
hundred twenty-three (701,923). All of such Shares available for issuance under
the Plan shall be available for issuance pursuant to Incentive Stock Options.
Notwithstanding the preceding sentence, the aggregate number of shares of Stock
which cumulatively may be available for issuance pursuant to Awards other than Awards of Options shall
not exceed three hundred fifty thousand (350,000). Stock
issued or to be issued under the Plan shall be authorized but unissued shares;
or, to the extent permitted by applicable law, issued shares that have been
reacquired by the Company. If any shares covered by an Award are not purchased
or are forfeited, or if an Award otherwise terminates without delivery of any
Stock subject thereto, then the number of shares of Stock counted against the
aggregate number of shares available under the Plan with respect to such Award
shall, to the extent of any such forfeiture or termination, again be available for making Awards
under the Plan. If the Option Price of any Option granted under the Plan, or if
pursuant to Section 18.3 the withholding
obligation of any Grantee with respect to an Option, is satisfied by tendering
shares of Stock to the Company (by either actual delivery or by attestation) or
by withholding shares of Stock, the total number of shares of
Stock issued shall be deemed delivered for purposes of determining the maximum
number of shares of Stock available for delivery under the Plan.

 

5.             EFFECTIVE DATE, DURATION AND AMENDMENTS

 

                5.1.         Effective Date.

 

                The Plan was originally effective March 1, 2001. The
Plan as herein amended and restated shall be effective September 30, 2004 (the “Amendment and
Restatement Date”), subject to approval of the Plan as herein amended
and restated by the Company’s stockholders within one year of the Amendment and
Restatement Date. Upon approval of the Plan as herein amended and restated by
the stockholders of the Company as set forth above, all Awards made under the
Plan as herein amended and restated on or after the Amendment and Restatement
Date shall be fully effective as if the stockholders of the Company had approved the Plan as herein
amended and restated on the Amendment and Restatement Date. If the stockholders
fail to approve the Plan as herein amended and restated within one year after
the Amendment and Restatement Date, any Awards made hereunder in excess of the
number of shares or forms available for Awards under the Plan prior to its amendment and restatement
shall be null and void and of no effect, and the applicable terms of the Plan
shall be the terms in effect immediately prior to the Amendment and Restatement
Date.

 

                5.2.         Term.

 

                The Plan shall terminate automatically ten (10) years
after the Amendment and Restatement
Date and may be terminated on any earlier date as provided in Section 5.3.

 

                5.3.         Amendment and
Termination of the Plan.

 

                The
Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any
shares of Stock as to which Awards have not been made. An amendment shall 

 

7

 

be contingent on approval of
the Company’s stockholders to the extent stated by the Board or required by
applicable law. No Awards shall be made after termination of the Plan. No amendment,
suspension, or termination of the Plan shall, without the consent of the
Grantee, impair rights or obligations under any Award theretofore awarded under
the Plan.

 

6.             AWARD ELIGIBILITY AND LIMITATIONS

 

                6.1.         Service Providers and
Other Persons

 

                Subject to this Section 6,
Awards may be made under the Plan to: (i) any Service Provider to the Company or of any Affiliate,
including any Service Provider who is an officer or director of the Company,
or of any Affiliate, as the Board shall determine and designate from time to
time, (ii) any Outside Director, and (iii) any other individual whose participation
in the Plan is determined to be in the best interests of the Company by the
Board.

 

                6.2.         Successive Awards.

 

                An eligible person may receive more than one Award,
subject to such restrictions as are provided herein.

 

                6.3.         Limitations on Incentive Stock Options.

 

                An Option shall constitute an Incentive Stock Option
only (i) if the Grantee of such Option is an employee of the Company or any
Subsidiary of the Company; (ii) to the extent specifically provided in the
related Award Agreement; and (iii) to the extent that the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares of Stock
with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee’s employer and
its Affiliates) does not exceed $100,000. This limitation shall be applied by
taking Options into account in the order in which they were granted.

 

                6.4.         Stand-Alone,
Additional, Tandem, and Substitute Awards.

 

                Awards
granted under the Plan may, in the discretion of the Board, be granted either alone or
in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Affiliate, or any business entity to be acquired by
the Company or an Affiliate, or any other right of a Grantee to receive payment
from the Company or any Affiliate. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is granted in
substitution or exchange for another Award, the Board shall require the
surrender of such other Award in consideration for the grant of the new Award.
In addition, Awards may be granted in lieu of cash compensation, including in
lieu of cash amounts payable under other plans of the Company
or any Affiliate, in which the value of Stock subject to the Award is
equivalent in value to the cash compensation (for example, Stock Units or Restricted Stock), or in which the Option
Price, grant price or purchase price of the Award in the nature of a right
that may be exercised is equal to the Fair Market Value of the underlying Stock minus the value of the
cash compensation surrendered (for example, Options granted with an Option
Price “discounted” by the amount of the cash compensation surrendered).

 

 

8

 

7.             AWARD AGREEMENT

 

                Each Award granted pursuant to the Plan shall be
evidenced by an Award Agreement, in such form or forms as the Board shall from time to
time determine. Award Agreements granted from time to time or
at the same time need not contain similar provisions but shall be consistent with the terms of the Plan.
Each Award Agreement evidencing an Award of Options shall specify whether
such Options are intended to be Non-qualified Stock Options or Incentive Stock
Options, and in the absence of such specification such options shall be deemed
Non-qualified Stock Options.

 

8.             TERMS AND CONDITIONS OF OPTION

 

                8.1.         Option Price.

 

                The Option Price of each Option shall be fixed by the
Board and stated in the Award Agreement evidencing such Option. The Option
Price of each Option shall be at least the Fair Market Value on the Grant Date
of a share of Stock; provided, however, that in the event that a Grantee is a Ten Percent
Stockholder, the Option Price of an Option granted to such Grantee
that is intended to be an Incentive Stock Option shall be not less than 110
percent of the Fair Market Value of a share of Stock on the Grant Date. In no
case shall the Option Price of any Option be less than the par value of a share
of Stock.

 

                8.2.         Vesting.

 

                Subject to Sections 8.3 and 17.3
hereof, each Option granted under the Plan shall become exercisable at such
times and under such conditions as shall be determined by the Board and stated
in the Award Agreement. For purposes of this Section 8.2,
fractional numbers of shares of Stock subject to an Option shall be rounded
down to the next nearest whole number. The Board may provide, for example, in the
Award Agreement for (i) accelerated exercisability of the Option in the event
the Grantee’s Service terminates on account of death, Disability or another
event, (ii) expiration of the Option prior to its term in the event of the
termination of the Grantee’s Service, (iii) immediate forfeiture of the Option in the event the Grantee’s
Service is terminated for Cause or (iv) unvested Options to be exercised
subject to the Company’s right of repurchase with respect to unvested shares of
Stock. No Option shall be exercisable in whole or in part prior to the date the
Plan is approved by the Stockholders of the Company as provided in Section 5.1  hereof.

 

                8.3.         Term.

 

                Each option granted under the Plan shall terminate,
and all rights to purchase shares of Stock thereunder shall cease, upon the
expiration of ten years from the date such Option is granted, or under such circumstances and
on such date prior thereto as is set forth in the Plan or as may be fixed by
the Board and stated in the Award Agreement relating to such Option (the “Termination
Date”); provided, however,
that in the event that the Grantee is a Ten Percent Stockholder, an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall
not be exercisable after the expiration of five years from its Grant Date.

 

 

9

 

                8.4.         Termination of
Service.

 

                Each Award
Agreement shall set forth the extent to which the Grantee shall have the right
to exercise the Option following termination of the Grantee’s Service. Such
provisions shall be determined in the sole discretion of the Board, need not be
uniform among all Options issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of Service.

 

                8.5.         Limitations on
Exercise of Option.

 

                Notwithstanding
any other provision of the Plan, in no event may any Option be exercised, in
whole or in part, prior to the date the Plan is approved by the stockholders of
the Company as provided herein, or after ten years following the Grant Date, or
after the occurrence of an event referred to in Section 17
hereof which results in termination of the Option.

 

                8.6.         Method of Exercise.

 

                An Option that is exercisable may be exercised by the Grantee’s
delivery to the Company of written notice of exercise on any
business day, at the Company’s principal office, on the form specified by the Company. Such notice
shall specify the number of shares of Stock with respect to which the Option is
being exercised and shall be accompanied by payment in full of the Option Price
of the shares for which the Option is being exercised. The minimum number
of shares of Stock with respect to which an Option may be exercised, in whole
or in part, at any time shall be the lesser of (i) 100 shares or such lesser
number set forth in the applicable Award Agreement and (ii) the maximum number
of shares available for purchase under the Option at the time of exercise.

 

                8.7.         Rights of Holders of Options.

 

                Unless otherwise stated in the applicable Award Agreement, an
individual holding or exercising an Option shall have none of the rights of a
stockholder (for example, the right to receive cash or dividend
payments or distributions attributable to the subject shares of Stock or to
direct the voting of the subject shares of Stock) until the shares of Stock
covered thereby are
fully paid and issued to him. Except as provided in Section 17
hereof, no adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date of such issuance.

 

                8.8.
        Delivery of Stock Certificates.

 

                Promptly
after the exercise of an Option by a Grantee and the payment in full of the
Option Price, such Grantee shall be entitled to the issuance of a stock certificate
or certificates evidencing his or her ownership of the shares of Stock subject
to the Option. Notwithstanding any other provision of this Plan to the
contrary, the Company may elect to satisfy any requirement
under this Plan for the delivery of stock certificates through the use of
book-entry.

 

10

 

                8.9.         Reload Options.

 

                At the discretion of the Board and subject to such
restrictions, terms and conditions as the Board may establish, Options granted
under the Plan may include a “reload” feature pursuant to which a Grantee
exercising an Option by the delivery of a number of shares of Stock in
accordance with Section 8.6 hereof would
automatically be granted an additional Option (with an Option Price equal to
the Fair Market Value of the Stock on the date the additional Option is granted
and with such other terms as the Board may provide) to purchase that number of
shares of Stock equal to the number delivered to exercise the original Option
with an Option term equal to the remainder of the original Option term unless
the Board otherwise determines in the Option Award Agreement for the original grant.

 

9.             TRANSFERABILITY OF OPTIONS

 

                9.1.         Transferability of Options.

 

                Except
as provided in Section 9.2, during the lifetime
of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetence,
the Grantee’s guardian or legal representative) may exercise an Option. Except
as provided in Section 9.2, no Option shall be
assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and
distribution.

 

                9.2.         Family Transfers.

 

                If
authorized in the applicable Award Agreement, a Grantee may transfer, not for
value, all or part of an Option that is not an Incentive Stock Option to any
Family Member. For the purpose of this Section 9.2, a “not
for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a
domestic relations order in settlement of marital property rights; or (iii) a
transfer to an entity in which more than fifty percent of the voting interests
are owned by Family Members (or the Grantee) in exchange for an interest in
that entity. Following a transfer under this Section 9.2,
any such Option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred
Options are prohibited except to Family Members of the original Grantee in
accordance with this Section 9.2 or
by will or the laws of descent and distribution. The events of termination of
Service of Section 8.4 hereof shall continue
to be applied with respect to the original Grantee, following which the Option
shall be exercisable by the transferee only to the extent, and for the periods specified,
in Section 8.4.

 

10.          RESTRICTED STOCK AND STOCK UNITS

 

                10.1.       Grant of Restricted Stock or Stock Units.

 

                The
Board may from time to time grant Restricted Stock or Stock Units to persons
eligible to receive Awards under Section 6
hereof, subject to such restrictions, conditions and other terms, if any, as
the Board may determine. Awards of Restricted Stock may be made 

 

11

 

for no consideration (other than par value of the
shares which is deemed paid by Services already rendered).

 

                10.2.       Restrictions.

 

                At the time a grant of Restricted Stock or Stock
Units is made, the Board may, in its sole discretion, establish a period of time (a “restricted
period”) applicable to such Restricted Stock or Stock Units. Each Award of
Restricted Stock or Stock Units may be subject to a different restricted
period. The Board may, in its sole discretion, at the time a grant of
Restricted Stock or Stock Units is made, prescribe restrictions in addition to
or other than the expiration of the restricted period, including the
satisfaction of corporate or individual performance objectives,
which may be applicable to all or any portion of the Restricted Stock or Stock
Units in accordance with Section 14.1
and 14.2. Neither Restricted Stock nor
Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered
or disposed of during the restricted period or prior to the satisfaction of any
other restrictions prescribed by the Board with respect to such Restricted
Stock or Stock Units.

 

                10.3.        Restricted Stock Certificates.

 

                The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Board may provide in an Award Agreement that either (i) the
Secretary of the Company shall hold such certificates for the
Grantee’s benefit until such time as the Restricted Stock is forfeited to the
Company or the restrictions lapse, or (ii) such certificates shall be delivered
to the Grantee, provided, however, that such certificates shall bear a legend or legends that
comply with the applicable securities laws and regulations and makes
appropriate reference to the restrictions imposed under the Plan, the Award Agreement, and the
Stockholders Agreement by and among the Company and its stockholders, as in effect
from time to time.

 

                10.4.
      Rights of Holders of Restricted
Stock.

 

                Unless
the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall
have the right to vote such Stock and the right to receive any dividends
declared or paid with respect to such Stock. The Board may provide that any
dividends paid on Restricted
Stock must be reinvested in shares of Stock, which may or may not be subject to
the same vesting conditions and restrictions applicable to such Restricted
Stock. All distributions, if any, received by a Grantee with respect to Restricted
Stock as a result of any stock split, stock dividend, combination of shares, or other similar
transaction shall be subject to the restrictions applicable to the original
Grant.

 

                10.5.       Rights of Holders of Stock Units.

 

                                10.5.1.    Voting and Dividend Rights.

 

                Unless the Board otherwise provides in an Award
Agreement, holders of Stock Units shall have no rights as stockholders of the
Company. The Board may provide in an Award Agreement evidencing a grant of Stock Units that the
holder of such Stock Units shall be entitled to receive, upon the
Company’s payment of a cash dividend on its outstanding Stock,  a cash payment for each
Stock Unit held equal to the per-share dividend paid on the Stock. Such Award
Agreement may also provide that such cash payment will be deemed reinvested 

 

12

 

in additional Stock Units at a price per unit equal to
the Fair Market Value of a share of Stock on the date that such
dividend is paid.

 

                                10.5.2.    Creditor’s Rights.

 

                A holder of
Stock Units shall have no rights other than those of a general creditor of the
Company. Stock Units represent an unfunded and unsecured obligation of the
Company, subject to
the terms and conditions of the applicable Award Agreement.

 

                10.6.
      Termination of Service.

 

                Unless the Board otherwise provides in an Award
Agreement or in writing after the Award Agreement is issued, upon the termination of a
Grantee’s Service, any Restricted Stock or Stock Units held by such Grantee
that have not vested, or with respect to which all applicable restrictions and
conditions have not lapsed, shall immediately be deemed forfeited. Upon
forfeiture of Restricted Stock or Stock Units, the Grantee shall have no
further rights with respect to such Award, including but not limited to any
right to vote Restricted Stock or any right to receive
dividends with respect to shares of Restricted Stock or Stock Units.

 

                10.7.       Purchase of Restricted Stock.

 

                The Grantee
shall be required, to the extent required by applicable law, to purchase the
Restricted Stock from the Company at a Purchase Price equal to the greater of
(i) the aggregate par
value of the shares of Stock represented by such Restricted Stock or (ii) the
Purchase Price, if any, specified in the Award Agreement relating to such
Restricted Stock. The Purchase Price shall be payable in a form
described in Section 12 or, in the discretion of the Board, in consideration for past
Services rendered to the Company or an Affiliate.

 

                10.8.
      Delivery of Stock.

 

                Upon the expiration or termination of any restricted
period and the satisfaction of any other conditions prescribed by the Board,
the restrictions applicable to shares of Restricted Stock or Stock Units settled in Stock shall lapse,
and, unless otherwise provided in the Award Agreement, a stock certificate
for such shares shall be delivered, free of all such restrictions, to the Grantee or the
Grantee’s beneficiary or estate, as the case may be.

 

11.          UNRESTRICTED STOCK AWARDS

 

                The Board may, in its sole discretion, grant (or sell
at par value or such other higher purchase price determined by the Board) an
Unrestricted Stock Award to any Grantee pursuant to which such Grantee may
receive shares of Stock free of any restrictions (“Unrestricted Stock”) under
the Plan. Unrestricted Stock Awards may be granted or sold as described in the
preceding sentence in respect of past services and other valid consideration, or
in lieu of, or in addition to, any cash compensation due to such Grantee.

 

 

13

 

12.          FORM OF PAYMENT FOR OPTIONS AND
RESTRICTED STOCK

12.1.       General Rule.

Payment of the Option
Price for the shares purchased pursuant to the exercise of an Option or the
Purchase Price for Restricted Stock shall be made in cash or in cash
equivalents acceptable to the Company.

12.2        Surrender of Stock.

To the extent the Award
Agreement so provides, payment of the Option Price for shares purchased
pursuant to the exercise of an Option or the Purchase Price for Restricted
Stock may be made all or in part through the tender to the Company of shares of
Stock, which shares, if acquired from the Company, shall have been held for at
least six months at the time of tender and which shall be valued, for purposes
of determining the extent to which the Option Price or Purchase Price has been
paid thereby, at their Fair Market Value on the date of exercise.

12.3.       Cashless Exercise.

With respect to an Option
only (and not with respect to Restricted Stock), to the extent the
Award Agreement so provides, payment of the Option Price for shares purchased
pursuant to the exercise of an Option may be made all or in part by delivery
(on a form acceptable to the Board) of an irrevocable direction to a licensed
securities broker acceptable to the Company to sell shares of Stock and to
deliver all or part of the sales proceeds to the Company in payment of the
Option Price and any withholding taxes described in Section 18.3.

12.4.       Other Forms of Payment.

To the extent the Award Agreement so provides, payment of the Option Price
for shares purchased pursuant to exercise of an Option or the Purchase
Price for Restricted Stock may be made in any other form that is consistent
with applicable laws, regulations and rules.

13.          DIVIDEND EQUIVALENT RIGHTS

13.1.       Dividend Equivalent Rights.

A Dividend Equivalent
Right is an Award entitling the recipient to receive credits based on cash
distributions that would have been paid on the shares of Stock specified in the
Dividend Equivalent Right (or other award to which it relates) if such shares
had been issued to and held by the recipient. A Dividend Equivalent Right may
be granted hereunder to any Grantee as a component of another Award or as a
freestanding award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend Equivalents credited to the holder of a Dividend Equivalent
Right may be paid

 

 

14

 

 

currently or may be deemed to be reinvested in
additional shares of Stock, which may thereafter accrue additional
equivalents. Any such reinvestment shall be at Fair Market Value on the date of reinvestment.
Dividend Equivalent Rights may be settled in cash or Stock or a combination
thereof, in a single installment or installments, all determined in the sole discretion
of the Board. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or
lapse of restrictions on, such other award, and that such Dividend Equivalent
Right shall expire or be forfeited or annulled under the same conditions as such other award. A
Dividend Equivalent Right granted as a component of another Award may also
contain terms and conditions different from such other award.

13.2.       Termination of Service.

Except as may otherwise
be provided by the Board either in the Award Agreement or in writing after the
Award Agreement is issued, a Grantee’s rights in all Dividend Equivalent Rights
or interest equivalents shall automatically terminate upon the Grantee’s termination of
Service for any reason.

14.          PERFORMANCE AND ANNUAL INCENTIVE AWARDS

14.1.       Performance Conditions

The right of a Grantee to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions or such other criteria
as may be specified by the Board. The Board may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts payable under any Award subject to performance
conditions, except as limited under Sections 14.2 hereof in the
case of a Performance Award or Annual Incentive Award intended to qualify under Code Section 162(m). If and to the
extent required under Code Section 162(m), any power or authority relating to a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.

14.2.                     Performance
or Annual Incentive Awards Granted to Designated 

Covered Employees

If and to the extent that
the Committee determines that a Performance or Annual Incentive Award to be
granted to a Grantee who is designated by the Committee as likely to be a
Covered Employee should qualify as “performance-based compensation” for
purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Performance or Annual Incentive Award shall be contingent upon achievement of
pre-established performance goals and other terms set forth in this Section 14.2.

 

15

 

 

14.2.1.    Performance Goals Generally.

The
performance goals for such Performance or Annual Incentive Awards shall consist
of one or more business criteria and a targeted level or levels of performance with
respect to each of such criteria, as specified by the Committee consistent with
this Section 14.2. Performance goals shall
be objective and shall otherwise meet the requirements of Code Section 162(m)
and regulations thereunder including the requirement that the level or levels
of performance targeted by the Committee result in the achievement of
performance goals being “substantially uncertain.” The Committee may determine
that such Performance
or Annual Incentive Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the performance goals
must be achieved as a condition to grant, exercise and/or settlement of such Performance or
Annual Incentive Awards. Performance goals may differ for Performance or Annual
Incentive Awards granted to any one Grantee or to different Grantees.

14.2.2.    Business Criteria.

One
or more of the following business criteria for the Company, on a consolidated basis,
and/or specified subsidiaries or business units of the Company (except with
respect to the total stockholder return and earnings per share criteria), shall
be used exclusively by the Committee in establishing performance goals for such
Performance or Annual Incentive Awards: (1) total stockholder return; (2) such
total stockholder return as compared to total return (on a comparable basis) of
a publicly available index such as, but not limited to, the Standard & Poor’s
500 Stock Index; (3) net income; (4) pretax earnings; (5) earnings before
interest expense, taxes, depreciation and amortization; (6) pretax operating
earnings after interest expense and before bonuses, service fees, and extraordinary
or special items; (7) operating margin; (8) earnings per share; (9) return on
equity; (10) return on capital; (11) return on investment; (12) operating
earnings; (13) working capital; (14) ratio of debt to stockholders’ equity and
(15) revenue.

14.2.3.    Timing For Establishing Performance Goals.

Performance goals shall be established not later
than ninety (90) days after the beginning of any
performance period applicable to such Performance or Annual Incentive Awards, or at such other date as may be
required or permitted for “performance-based compensation” under Code Section
162(m).

14.2.4.    Performance or Annual Incentive Award Pool.

The Committee may
establish a Performance or Annual Incentive Award pool, which shall be an
unfunded pool, for purposes of measuring Company performance in connection with
Performance or Annual Incentive Awards.

14.2.5.         Settlement of Performance or
Annual Incentive Awards;

Other Terms.

Settlement of such
Performance or Annual Incentive Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in
connection

 

16

 

with such Performance or Annual Incentive Awards. The
Committee shall specify the circumstances in which such Performance or Annual
Incentive Awards shall be paid or forfeited in the event of termination of
Service by the Grantee prior to the end of a performance period or settlement
of Performance Awards.

14.3.                     Written Determinations.

All
determinations by the Committee as to the establishment of performance goals, the amount of any Performance
Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards, and
the amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards, shall be made
in writing in the
case of any Award intended to qualify under Code Section 162(m). To the extent
required to comply with Code Section 162(m), the Committee may delegate any responsibility relating to such
Performance Awards or Annual Incentive Awards.

14.4.                     Status of Section 14.2 Awards
Under Code Section 162(m)

It
is the intent of the Company that Performance Awards and Annual Incentive Awards
under Section 14.2 hereof granted to
persons who are designated by the Committee as likely to be Covered Employees
within the meaning of Code Section 162(m) and regulations thereunder shall, if
so designated by the Committee, constitute “qualified performance-based
compensation” within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the
terms of Section 14.2, including the definitions of Covered
Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because
the Committee cannot determine with certainty whether a given Grantee will be a
Covered Employee with respect to a fiscal year that has not yet been completed,
the term Covered Employee as used herein shall mean only a person designated by
the Committee, at the time of grant of Performance Awards or an Annual Incentive
Award, as likely to be a Covered Employee with respect to that fiscal year. If
any provision of the
Plan or any agreement relating to such Performance Awards or Annual Incentive Awards does
not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements.

15.          PARACHUTE
LIMITATIONS

Notwithstanding any other
provision of this Plan or of any other agreement, contract, or understanding
heretofore or hereafter entered into by a Grantee with the Company or any Affiliate,
except an agreement, contract, or understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an “Other Agreement”), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified
individual,” as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Stock Unit held by that Grantee and any right to

 

17

 

 

receive any payment or other benefit under this Plan
shall not become exercisable or vested (i) to the extent that such
right to exercise, vesting, payment, or benefit, taking into account all other
rights, payments, or benefits to or for the Grantee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit to
the Grantee under this Plan to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute Payment, the
aggregate after-tax amounts received by the Grantee from the Company under this
Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax
amount that could be received by the Grantee without causing any such payment
or benefit to be considered a Parachute Payment. In the event that
the receipt of any such right to exercise, vesting, payment, or benefit under this Plan, in conjunction
with all other rights, payments, or benefits to or for the Grantee
under any Other Agreement or any Benefit Arrangement would cause the Grantee to be considered to have received
a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause (ii) of the preceding sentence,
then the Grantee shall have the right, in the Grantee’s sole discretion, to
designate those rights, payments, or benefits under this Plan, any Other
Agreements, and any Benefit Arrangements that should be reduced or eliminated
so as to avoid having the payment or benefit to the Grantee under this Plan be
deemed to be a Parachute Payment.

16.          REQUIREMENTS
OF LAW

16.1.                     General.

The Company shall
not be required to sell or issue any shares of Stock under any Award if the sale or issuance of such
shares would constitute a violation by the Grantee, any other individual
exercising an Option, or the Company of any provision of any law or regulation
of any governmental authority, including without limitation any federal or
state securities laws or regulations. If at any time the Company shall
determine, in its discretion, that the listing, registration or qualification
of any shares subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to
such Award unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company, and any delay caused thereby shall in no way affect the date of
termination of the Award. Specifically, in connection with the Securities Act,
upon the exercise of any Option or the delivery of any shares of Stock
underlying an Award, unless a registration statement under such Act is in
effect with respect to the shares of Stock covered by such Award, the Company
shall not be required to sell or issue such shares unless the Board has
received evidence satisfactory to it that the Grantee or any other
individual exercising an Option may acquire such shares pursuant to an exemption from registration
under the Securities Act. Any determination in this connection by the Board
shall be final, binding, and conclusive. The Company may, but shall in no event
be obligated to, register any securities covered hereby pursuant to the
Securities Act. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares of
Stock pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any

 

18

 

jurisdiction that expressly imposes the requirement
that an Option shall not be exercisable until the shares of Stock covered by
such Option are registered or are exempt from registration, the exercise of
such Option (under circumstances in which the laws of such jurisdiction apply)
shall be deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.

16.2.                     Rule 16b-3.

During
any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is
the intent of the Company that Awards pursuant to the Plan and the
exercise of Options granted hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To
the extent that any provision of the Plan or action by the Board does not
comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by
law and deemed advisable by the Board, and shall not affect the validity of the
Plan. In the event that Rule 16b-3 is revised or replaced, the Board may
exercise its discretion to modify this Plan in any respect necessary to satisfy
the requirements of, or to take advantage of any features of, the revised
exemption or its replacement.

17.          EFFECT
OF CHANGES IN CAPITALIZATION

17.1.       Changes in Stock.

If the number of
outstanding shares of Stock is increased or decreased or the shares of Stock
are changed into or exchanged for a different number or kind of shares or other
securities of the Company on account of any recapitalization, reclassification,
stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration
by the Company occurring after the Effective Date, the number and kinds of shares for which grants of Options and
other Awards may be made under the Plan shall be adjusted proportionately and
accordingly by the Company. In addition, the number and kind of shares for
which Awards are outstanding shall be adjusted proportionately and accordingly
so that the proportionate interest of the Grantee immediately following such
event shall, to the extent practicable, be the same as immediately before such
event. Any such adjustment in outstanding Options shall not change the
aggregate Option Price payable with respect to shares that are subject to the
unexercised portion of an outstanding Option, but shall include a corresponding
proportionate adjustment in the Option Price per share. The conversion of any
convertible securities of the Company shall not be treated as an increase in
shares effected without receipt of consideration. Notwithstanding the
foregoing, in the event of any distribution to the Company’s stockholders of
securities of any other entity or other assets (including an extraordinary cash dividend but
excluding a non-extraordinary dividend payable in cash or in stock
of the Company) without receipt of consideration by the Company, the Company may, in such manner as the
Company deems appropriate, adjust (i) the number and kind of shares subject to
outstanding Awards and/or (ii) the exercise price of outstanding Options to
reflect such distribution.

17.2.                     Reorganization
in Which the Company Is the Surviving Entity Which

does not Constitute a Corporate Transaction.

 

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Subject
to Section 17.3 hereof, if the Company
shall be the surviving entity in any reorganization, merger, or consolidation
of the Company with one or more other entities which does not constitute a
Corporate Transaction, any Option theretofore granted pursuant  to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation. Subject to any contrary language
in an Award Agreement evidencing an Award, any restrictions applicable to
such Award shall apply as well to any replacement shares received by the
Grantee as a result of the reorganization, merger or consolidation.

17.3.                     Corporate
Transaction.

Subject to the exceptions
set forth in the last sentence of this Section 17.3
and the last sentence of Section 17.4:

(i)            upon the occurrence of a Corporate
Transaction, all outstanding shares of Restricted Stock shall be
deemed to have vested, and all restrictions and conditions applicable to such
shares of Restricted Stock shall be deemed to have lapsed, immediately prior to
the occurrence of such Corporate Transaction, and

(ii)           either of the following two actions
shall be taken:

(A)          fifteen days prior to the scheduled
consummation of a Corporate Transaction, all Options outstanding hereunder
shall become immediately exercisable and shall remain exercisable for
a period of fifteen days, or

(B)           the Board may elect, in its sole
discretion, to cancel any outstanding Awards of Options and/or Restricted
Stock, and pay or deliver, or cause to be paid or delivered, to the holder
thereof an amount in cash or securities having a value (as determined by the
Board acting in good faith), in the case of Restricted Stock, equal to the
formula or fixed
price per share paid to holders of shares of Stock and, in the case of Options,
equal to the product of the number of shares of Stock subject to the Option (the
“Award Shares”) multiplied
by the amount, if any, by which (I) the formula or fixed price per share paid
to holders of shares of Stock pursuant to such transaction exceeds (II)
the Option Price applicable
to such Award Shares.

With respect to the Company’s
establishment of an exercise window, (i) any exercise of an Option during
such fifteen-day period shall be conditioned upon the consummation of the event and shall be
effective only immediately before the consummation of the event, and (ii) upon
consummation of any Corporate Transaction the Plan, and all outstanding but unexercised Options shall
terminate. The Board shall send written notice of an event that will result in
such a termination to all individuals who hold Options not later than the time
at which the Company gives notice thereof to its stockholders. This Section 17.3 shall not apply to any Corporate Transaction to
the extent that provision is made in writing in connection with such Corporate
Transaction for the assumption or continuation of the Options and Restricted
Stock theretofore granted, or for the substitution for such Options 

20

 

and Restricted Stock for new common stock options and
new common stock restricted stock relating to the stock of a
successor entity, or a parent or subsidiary thereof, with appropriate adjustments
as to the number of shares (disregarding any consideration that is not common
stock) and option exercise prices, in which event the Plan, Options and
Restricted Stock
theretofore granted shall continue in the manner and under the terms so
provided.

17.4.                     Adjustments.

Adjustments
under this Section 17 related to shares of
Stock or securities of the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share. The Board shall determine the
effect of a Corporate Transaction upon Awards other than Options and Restricted
Stock, and such effect shall be set forth in the appropriate Award Agreement.
The Board may provide in the Award Agreements at the time of grant, or any time
thereafter with the consent of the Grantee, for different provisions to apply
to an Award in place of those
described in Sections 17.1, 17.2 and 17.3.

17.5.                     No
Limitations on Company.

The making of Awards
pursuant to the Plan shall not affect or limit in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes of its
capital or business structure or to merge, consolidate, dissolve, or liquidate,
or to sell or transfer all or any part of its business or assets.

18.          GENERAL PROVISIONS

18.1.       Disclaimer of Rights

No provision in the Plan
or in any Award or Award Agreement shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any
Affiliate, or to interfere in any way with any contractual or other right or
authority of the Company either to increase or decrease the compensation or
other payments to any individual at any time, or to terminate any employment or
other relationship between any individual and the Company.
In addition, notwithstanding anything contained in the Plan to the contrary,
unless otherwise stated in the applicable Award Agreement, no Award granted under the Plan shall be affected by any
change of duties or position of the Grantee, so long as such Grantee
continues to be a director, offer, consultant or employee of the Company or an Affiliate.
The obligation of the Company to pay any benefits pursuant to this Plan shall
be  interpreted as a contractual
obligation to pay only those amounts described herein, in the manner and under the conditions
prescribed herein. The Plan shall in no way be interpreted to require the
Company to transfer any amounts to a third party trustee or otherwise hold any
amounts in trust or escrow for payment to any Grantee or beneficiary under the
terms of the Plan.

 

21

 

18.2.                     Nonexclusively
of the Plan

Neither
the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations upon the right and authority of
the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.

18.3.                     Withholding
Taxes

The
Company or an Affiliate, as the case may be, shall have the right to deduct
from payments of any kind otherwise due to a Grantee any Federal, state, or
local taxes of any kind
required by law to be withheld with respect to the vesting of or other lapse of
restrictions applicable to an Award or upon the issuance of any shares of Stock
upon the exercise of an Option or pursuant to an Award. At the time of such
vesting, lapse, or  exercise, the
Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the Company or the Affiliate
may reasonably determine to be necessary to satisfy such withholding
obligation. Subject to the prior approval of the Company or the Affiliate,
which may be withheld by the Company or the Affiliate, as the case may be, in
its sole discretion, the Grantee may elect to satisfy such obligations, in
whole or in part, (i) by causing the Company or the Affiliate to withhold
shares of Stock otherwise issuable to the Grantee or (ii) by delivering to the
Company or the Affiliate shares of Stock already owned by the Grantee. The shares of Stock so
delivered or withheld shall have an aggregate Fair Market Value equal to such
withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding
obligation shall be determined by the Company or the Affiliate as of the date
that the amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this Section 18.3
may satisfy his or her withholding obligation only with shares of Stock that
are not subject to any repurchase, forfeiture, unfulfilled vesting, or other
similar requirements.

18.4.                     Captions

The use of captions in this Plan or any
Award Agreement is for the convenience of reference only and shall not affect
the meaning of any provision of the Plan or such Award Agreement.

18.5.                     Other
Provisions

Each Award granted under the Plan may contain such
other terms and conditions not inconsistent with the Plan
as may be determined by the Board, in its sole discretion.

18.6.                     Number
And Gender 

With
respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include
the feminine gender, etc., as the context requires.

22

 

18.7.                     Severability

If
any provision of the Plan or any Award Agreement shall be determined, to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.

18.8.                     Governing Law

The
validity and construction of this Plan and the instruments evidencing the Award
hereunder shall be governed by the laws of the State of New York, other than
any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Plan and the instruments evidencing the
Awards granted hereunder to the substantive laws of any other jurisdiction.

*    *    *

To
record adoption of the amendment and restatement of the Plan by the Board as of
September 29, 2004, and approval of the amendment and restatement of the Plan
by the stockholders on September 30, 2004, the Company has caused its
authorized officer to execute the Plan.

 

	
   

  	
  ACA CAPITAL HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alan S. Roseman

  
	
   

  	
  Title: President and CEO

  

 

 

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