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Exhibit 10.5  

        This LOAN AND SECURITY AGREEMENT dated as of the Effective Date, between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara, California
95054 and KINTERA, INC. ("Borrower"), whose address is 9605 Scranton Rd., Suite 240, San Diego, California 92121, provides the terms on which Bank will lend to Borrower and Borrower will repay
Bank. The parties agree as follows: 

1.     ACCOUNTING AND OTHER TERMS  

        Accounting terms not determined in this Agreement will be construed following GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including" and "includes" always mean "including (or includes) without limitation," in this or any Loan Document. 

2.     LOAN AND TERMS OF PAYMENT  

2.1   Promise to Pay.  

        Borrower promises to pay Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the Credit Extensions. 

2.1.1   Revolving Advances.  

PRIOR TO THE CONSUMMATION OF THE EQUITY EVENT CONDITION THE FOLLOWING CLAUSE (a) SHALL APPLY:  

        (a)   Bank
will make advances (referred to herein as the "Revolving Advances") not exceeding (i) the lesser of (A) the Committed Revolving Line or (B) the
Borrowing Base. Amounts borrowed under this Section may be repaid and reborrowed during the term of this Agreement. 

AFTER THE CONSUMMATION OF THE EQUITY EVENT CONDITION THE FOLLOWING CLAUSE (a) SHALL APPLY AND THE ABOVE CLAUSE (a) SHALL NO LONGER BE
EFFECTIVE:  

        (a)   Bank
will make advances (referred to herein as the "Revolving Advances") not exceeding the Committed Revolving Line minus all amounts for services utilized under the
Cash Management Services Sublimit. Amounts borrowed under this Section may be repaid and reborrowed during the term of this Agreement. 

        (b)   To
obtain a Revolving Advance, Borrower must notify Bank by facsimile or telephone by 12:00 p.m. Pacific time on the Business Day the Revolving Advance is
proposed to be made. Borrower must promptly confirm the notification by delivering to Bank the Payment/Advance Form, in the form attached hereto as Exhibit B. Bank will credit Revolving
Advances to Borrower's deposit account. Bank may make Revolving Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if any
such Revolving Advances are necessary to meet Obligations which have become due. Bank may rely on any telephonic notice given by a person whom Bank believes is a Responsible Officer or such Person's
written designee, and Borrower hereby indemnifies Bank for any loss Bank suffers due to any such reliance, unless such loss is the result of Bank's gross negligence or willful misconduct. 

        (c)   The
Committed Revolving Line terminates on the Revolving Maturity Date, when all Revolving Advances and related Obligations are immediately payable. 

        (d)   Bank's
obligation to lend the undisbursed portion of the Obligations will terminate if, in Bank's sole discretion, there has been a material adverse change in the
general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations, 

 

or
there has been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement. 

2.1.2   Cash Management Services Sublimit.  

        Only on and after such time as the Equity Event Condition has been satisfied, Borrower may use up to $2,000,000 for Bank's Cash Management Services, which may
include merchant services, direct deposit of payroll, business credit card, and check cashing services identified in various cash management services agreements related to such services (the "Cash
Management Services"). Such aggregate amounts utilized under the Cash Management Services Sublimit will at all times reduce the amount otherwise available to be borrowed under the Committed Revolving
Line as set forth above in Section 2.1.1 and no utilization of any Cash Management Service shall arise if a Revolving Advance would not be permitted to be extended pursuant to
Section 2.1.1 hereof. Further, any amounts Bank pays on behalf of Borrower or any amounts that are not paid by Borrower for any Cash Management Services will be treated as Revolving Advances
under the Committed Revolving Line and will accrue interest at the rate for Revolving Advances. 

2.1.3   Equipment Advances.  

        (a)   Through
January 31, 2004 (the "Equipment Availability End Date"), Bank will make advances ("Equipment Advance" and, collectively, "Equipment Advances") in an
aggregate amount of the initial loan amount for each such Equipment Advance not exceeding the Committed Equipment Line. The Equipment Advances may only be used to finance or refinance Eligible
Equipment purchased on or after 90 days before the date of each Equipment Advance and may not exceed 100% of the invoices relating thereto excluding taxes, shipping, warranty charges, freight
discounts and installation expense. Software, tenant improvements and other costs of a similar nature, all as deemed acceptable to Bank for advance purposes hereunder, may constitute up to 25% of the
aggregate amount of Equipment Advances outstanding from time to time. Notwithstanding the foregoing, and solely with respect to the initial Equipment Advance to be made hereunder (as long as such
Initial Equipment Advance is extended substantially concurrently with Borrower's execution and delivery of this Agreement to Bank), Bank agrees to fund as part of any such Equipment Advance an amount
not to exceed $250,000 in the aggregate based on 100% of the depreciated value of certain items of Equipment, which items are deemed to be satisfactory to Bank. 

        (b)   Interest
accrues from the date of the making of each Equipment Advance at the applicable rate in Section 2.3(a) and shall be payable on the first day of the month
following the making of such Equipment Advance and continuing until such Equipment Advance has been repaid in full. Each Equipment Advance shall be payable in thirty-six (36) equal
monthly installments of principal beginning on the first day of the month following the making of such Equipment Advance and continuing on the first day of each of the succeeding
thirty-five months thereafter (such final installment payment date for such Equipment Advance is referred to herein as the "Equipment Maturity Date" relating to such Equipment Advance),
with the understanding that on each Equipment Maturity Date the related Equipment Advance and all related Obligations shall be repaid in full. Equipment Advances when repaid may not be reborrowed. 

        (c)   To
obtain an Equipment Advance, Borrower must notify Bank (the notice is irrevocable) by facsimile no later than 12:00 p.m. Pacific time 1 Business Day before the
day on which the Equipment Advance is to be made. The notice in the form of Exhibit B (Payment/Advance Form) must be signed by a Responsible Officer or written designee and include a copy of
the invoice and other documentary information as the Bank may reasonably request in connection with the Equipment that is the subject of the Equipment Advance proposed to be made. 

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2.2   Overadvances.  

        If Borrower's Obligations above exceed the applicable lending limitations set forth above, Borrower must immediately pay Bank the excess. 

2.3   Interest Rate, Payments.  

        (a)   Interest
Rate. (i) Equipment Advances shall accrue interest on the outstanding principal balance at a per annum rate of four percentage points (4.00%) above the
Prime Rate and having, in any event, a minimum rate of eight percent (8.00%) per annum, provided that on and after the satisfaction of the Equity Event
Condition, Equipment Advances shall thereafter accrue interest on the outstanding principal balance at a per annum rate of two and one-half percentage points (2.50%) above the Prime Rate
and having, in any event, a minimum rate of six and one-half percent (6.50%) per annum; (ii) Revolving Advances shall accrue interest
on the outstanding principal balance at a per annum rate of two percentage points (2.00%) above the Prime Rate and having, in any event, a minimum rate
of six percent (6.00%) per annum, provided that on and after the satisfaction of the Equity Event Condition, Revolving Advances shall thereafter accrue
interest on the outstanding principal balance at a per annum rate of one percentage point (1.00%) above the Prime Rate and having, in any event, a
minimum rate of five percent (5.00%) per annum. Upon the occurrence and during the continuance of an Event of Default, Obligations accrue interest at
five (5) percentage points above the rate effective immediately before the Event of Default. The interest rate increases or decreases when the Prime Rate changes. Interest is computed on a
360-day year for the actual number of days elapsed. 

        (b)   Payments.
Interest due on the Revolving Advances and the Equipment Advances is payable on the first day of each month. Bank may debit any of Borrower's deposit accounts
for principal and interest payments owing or any amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits Borrower's accounts. These debits are not a set-off. Payments
received after 12:00 noon Pacific Time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the
next Business Day and additional fees or interest accrue. 

2.4   Fees.  

        (a)   Facility
Fee. Borrower shall pay to Bank a fee of $5,000 concurrently herewith, which shall be in addition to interest and to all other amounts payable hereunder and
which shall not be refundable. 

        (b)   Bank
Expenses. Borrower shall pay to the Bank all Bank Expenses (including reasonable attorneys' fees and expenses) incurred through and after the Closing Date when due
with the understanding that Bank shall use its best efforts to keep the legal documentation expenses for the drafting and negotiating of this Agreement prior to the execution hereof less than $5,000. 

3.     CONDITIONS OF LOANS  

3.1   Conditions Precedent to Initial Credit Extension.  

        Bank's obligation to make the initial Credit Extension is subject to the condition precedent that it receive the agreements, documents and fees it requires,
including, without limitation, the warrant to purchase stock, the negative pledge agreement, certified corporate resolutions and the third party agreements regarding third party locations of
Collateral. 

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3.2   Conditions Precedent to all Credit Extensions.  

        Bank's obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following: 

        (a)   timely
receipt of any Payment/Advance Form; and 

        (b)   the
representations and warranties in Section 5 must be materially true on the date of the Payment/Advance Form and on the effective date of each Credit Extension
(except to the extent they relate specifically to an earlier date, in which case such representations and warranties must materially be true at such time with respect to any such earlier date) and no
Event of Default may have occurred and be continuing, or result from the Credit Extension. Each Credit Extension is Borrower's representation and warranty on that date that the representations and
warranties of Section 5 remain true (except to the extent they relate specifically to an earlier date, in which case such representations and warranties must materially remain true at such time
with respect to any such earlier date). 

4.     CREATION OF SECURITY INTEREST  

4.1   Grant of Security Interest.  

        Borrower grants Bank a continuing security interest in all presently existing and later acquired Collateral to secure all Obligations and performance of each of
Borrower's duties under the Loan Documents. Except for Permitted Liens, any security interest will be a first priority security interest in the Collateral. If this Agreement is terminated, Bank's lien
and security interest in the Collateral will continue until Borrower fully pays and performs the Obligations, at which time Bank agrees to release its liens and security interests in the Collateral.
Bank acknowledges and agrees that the security interest granted hereunder does not extend to the Donations and the Donations Account (other than with respect sums deposited therein that do not
constitute Donations) and Bank will not exercise any rights as a secured creditor with respect thereto nor will Bank exercise any banker's lien rights of offset with respect thereto,  provided that Bank
shall maintain any rights the Bank may have from time to time as an unsecured creditor relating thereto. Bank agrees to enter into
customary estoppel letters in favor of lenders financing items of equipment that comply with the definitions of Permitted Liens and Permitted Indebtedness hereunder. Further, Bank hereby acknowledges
and agrees that enforcement of its rights with respect to certain items of Collateral in which the Bank is granted a security interest (including the use or assignment thereof) may be restricted by
the provisions of Sections 9407(b), 9408(d) or 9409(b) of the Code. 

4.2   Authorization to File.  

        Borrower authorizes Bank to file financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to
perfect or protect Bank's interest in the Collateral. 

5.     REPRESENTATIONS AND WARRANTIES  

        Borrower represents and warrants as follows, subject to the specific exceptions to the following as are stated in the Schedule hereto as approved by Bank: 

5.1   Due Organization and Authorization.  

        Each of Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the 

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conduct
of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 

        The
execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower's formation documents, nor constitute an event of default under
any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material
Adverse Change. 

5.2   Collateral.  

        Borrower has good title to the Collateral, free of Liens except Permitted Liens or Borrower has Rights to each asset that is Collateral. Borrower has no other
deposit account, other than the deposit accounts described in the Schedule. The Accounts are bona fide, existing obligations, and the service or property has been or will be performed or delivered to
the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. The Collateral is not in the possession of any third party bailee (such as at a
warehouse), other than as disclosed on the Schedule attached hereto and with respect to any such locations, Borrower shall cause such parties to enter into a third party agreement with respect to the
Lien of the Bank therein and its rights attendant thereto, in form reasonably acceptable to Bank (and such agreements shall be delivered to Bank no later than 30 days from the Effective Date).
In the event that Borrower, after the date hereof, intends to store or otherwise deliver the Collateral to such a bailee that is not disclosed on the attached Schedule and for which Bank has obtained
an appropriate third party agreement satisfactory to Bank, then Borrower will receive the prior written consent of Bank and such bailee must acknowledge in writing that the bailee is holding such
Collateral for the benefit of Bank. Borrower has no notice of any actual or imminent Insolvency Proceeding of any account debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. All Inventory is in all material respects of good and marketable quality, free from material defects. Borrower is the sole owner of the Intellectual Property, except for
non-exclusive licenses granted to its customers in the ordinary course of business. 

5.3   Litigation.  

        Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers, threatened by or against
Borrower or any Subsidiary in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change. 

5.4   No Material Adverse Change in Financial Statements.  

        All consolidated financial statements for Borrower, and any Subsidiary, delivered to Bank fairly present in all material respects Borrower's consolidated
financial condition and Borrower's consolidated results of operations. There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent
financial statements submitted to Bank. 

5.5   Solvency.  

        Borrower is able to pay its debts (including trade debts) as they mature. 

5.6   Regulatory Compliance.  

        Borrower is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act. Borrower is not engaged as one of
its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has compiled in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be 

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expected
to cause a Material Adverse Change. None of Borrower's or any Subsidiary's properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and
paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents,
approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted, except
where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 

5.7   Subsidiaries.  

        Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments, including the Subsidiaries listed on
Schedule 5.7 hereto. 

5.8   Full Disclosure.  

        No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank (taken together with all such written
certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or
statements not misleading, with it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that
actual results during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results. 

5.9   Donations Account.  

        Except as set forth in the following provisos, Borrower hereby represents and warrants to the Bank that the funds
deposited into the Donations Accounts consist solely of Donations and no other funds of any kind, including, without limitation, any other funds of Borrower from any other source, are deposited in the
Donations Account or otherwise commingled therewith at any time or for any purpose whatsoever, provided that it is understood and agreed that the
service fees payable to the Borrower derived from the Donations shall from time to time be deducted from the aggregate balance of the deposited Donations and that such service fees shall upon
designation as such no longer be considered part of the Donations (and thus such amount shall at such time constitute Collateral hereunder), provided,
further, the amounts deposited in the Donations Account accrue interest and such interest shall be deemed Collateral hereunder. 

6.     AFFIRMATIVE COVENANTS  

        Borrower will do all of the following for so long as Bank has an obligation to lend, or there are outstanding Obligations: 

6.1   Government Compliance.  

        Borrower will maintain its legal existence and good standing and the legal existence and good standing of all Subsidiaries' in the applicable jurisdiction of
formation and maintain qualification in each applicable jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which such party is subject to the extent that noncompliance therewith could have a
material adverse effect on Borrower's business or operations or could reasonably be expected to cause a Material Adverse Change. 

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PRIOR TO THE CONSUMMATION OF THE IPO THE FOLLOWING SECTION 6.2 SHALL APPLY:  

6.2   Financial Statements, Reports, Certificates.  

        (a)   Borrower
will deliver to Bank: (i) as soon as available, but no later than 30 days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as available,
but no later than 150 days after the last day of Borrower's fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified
opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank, provided that with respect to the Borrower's 2002 fiscal year, Borrower shall
deliver such audited financial statements to Bank no later than September 30, 2003; (iii) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary
that could result in damages or costs to Borrower or any Subsidiary of $100,000 or more; and (iv) budgets, sales projections, operating plans or other financial information Bank reasonably
requests. 

        (b)   Within
30 days after the last day of each month, Borrower will deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form of
Exhibit C, with aged listings of accounts receivable and accounts payable, provided that on and after the satisfaction of the Equity Event Condition. Borrower shall not be required to comply
with the provisions of this clause. 

        (c)   Within
30 days after the last day of each month, Borrower will deliver to Bank with the monthly financial statements a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit D. 

        (d)   Allow
Bank to audit Borrower's Collateral at Borrower's expense, which shall not exceed $2,500 per audit prior to an Event of Default. Such audits will be conducted no
more often than every 6 months unless an Event of Default has occurred and is continuing, provided that prior to the making of the initial Revolving Advance hereunder, such an audit shall be
conducted which shall have results acceptable to Bank. Further, on and after the satisfaction of the Equity Event Condition, no audits at Borrower's expense shall be required to be conducted. 

AFTER THE CONSUMMATION OF THE IPO, THE FOLLOWING SECTION 6.2 SHALL APPLY AND THE ABOVE SECTION 6.2 SHALL NO LONGER BE EFFECTIVE:  

6.2   Financial Statements, Reports, Certificates.  

        (a)   Borrower
will deliver to Bank; (i) within 45 days of the end of each quarter, copies of all statements, reports and notices made available to Borrower's
security holders or to any holders of Subordinated Debt and all reports on 10-Q filed with the Securities and Exchange Commission; (ii) within 90 days of the end of each
fiscal year, copies of all statements, reports and notices made available to Borrower's security holders or to any holders of Subordinated Debt and all reports on Form 10-K filed
with the Securities and Exchange Commission; (iii) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of $100,000 or more; and (iv) budgets, sales projections, operating plans or other financial information Bank reasonably requests. 

        (b)   Within
45 days after the last day of each quarter, Borrower will deliver to Bank a Compliance Certificate signed by a Responsible Officer in the form of
Exhibit D attached hereto. 

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6.3   Inventory; Returns.  

        Borrower will keep all inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors
will follow Borrower's customary practices as they exist at execution of this Agreement. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims that involve more than
$100,000. 

6.4   Taxes.  

        Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments (other than taxes and
assessments which Borrower is contesting in good faith, with adequate reserves maintained in accordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to the
payment. 

6.5   Insurance.  

        Borrower will keep its business and the Collateral insured for risks and in amounts standard for Borrower's industry, and as Bank may reasonably request.
Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank in Bank's reasonable discretion. All property policies will have a lender's loss payable endorsement
showing Bank as an additional loss payee to the extent of its insurable interest and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at
least 20 days notice before canceling its policy. At Bank's request, Borrower will deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy
will, at Bank's option, be payable to Bank on account of the Obligations, all only to the extent of the Bank's insurable interest. If no Default or Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be payable to Borrower to replace the property subject to the claim, provided  that any such replacement property shall be deemed
Collateral in which Bank has been granted a first priority security interest. If a Default or Event of Default has occurred
and is continuing, then, at Bank's option, proceeds payable under any policy will be payable to Bank on account of the Obligations 

6.6   Primary Accounts.  

        Borrower will maintain its primary operating account relationships with Bank. Notwithstanding the foregoing, (i) Borrower shall not be required to maintain
Borrower's credit card processing relationships with Bank; (ii) within 30 days of the Effective Date, or the establishment of any bank or investment accounts not maintained at or through
Bank (the "Non-SVB Accounts"), whichever is later, Borrower shall cause the institutions at which such Non-SVB Accounts are maintained to execute and deliver to Bank account
control agreements in form and substance reasonably satisfactory to Bank; and (iii) within 45 days of the Effective Date, Borrower shall cause to move to and maintain with Bank the
Donations Account. 

6.7   Financial Covenants.  

        Prior to such time that the Equity Event Condition has been satisfied, Borrower will maintain the following
financial covenants, which shall be measured as of the last day of each month: 

        (i)    Quick Ratio. A ratio of Quick Assets to Current Liabilities of at least 1.75 to 1.00. 

        (ii)   Tangible Net Worth. A Tangible Net Worth of at least One Million Dollars ($1,000,000) plus 50% of the amount of net
proceeds that the Borrower receives from equity financing transactions after the date hereof. 

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        On and after such time that the Equity Event Condition has been satisfied, Borrower will maintain the following financial covenants, which
shall be measured as of the last day of each quarter: 

        (i)    Quick Ratio. A ratio of Quick Assets to Current Liabilities of at least 2.50 to 1.00. 

        (ii)   Tangible Net Worth. A Tangible Net Worth of at least One Million Dollars ($1,000,000) plus 50% of the net amount of
proceeds that the Borrower receives from equity financing transactions after the date hereof. 

6.8   Intellectual Property/Proceeds Resulting in Collateral.  

        Except as set forth in the Schedule, Borrower has no present maskworks, software, computer programs and other works of authorship registered with the United
States Copyright Office, and Borrower shall not hereafter register any maskworks, software, computer programs or other works of authorship subject to United States copyright protection with the United
States Copyright Office that result, as proceeds thereof or otherwise, in any Collateral hereunder (including Collateral consisting of license fees, royalties or accounts) without first complying with
the following: (i) providing Bank with at least 15 days prior written notice thereof, (ii) providing Bank with a copy of the application for any such registration and
(iii) executing and filing such other instruments, and taking such further actions as Bank may reasonably request from time to time to perfect or continue the perfection of Bank's interest in
the Collateral. With respect to the registered copyrights listed on Schedule 6.8 hereto, Borrower shall enter into an agreement to be filed in the United States Copyright Office solely in order
for the Bank
to be able to perfect its Lien hereunder in the Collateral, and the Collateral only, which agreement shall be in form reasonably satisfactory to the Bank. 

6.9   Donations and the Donations Account.  

        Except as set forth in the following provisos. Borrower hereby covenants and agrees only to deposit into the
Donations Accounts the funds from the Donations and no other funds of any kind, including, without limitation, any other funds of Borrower from any other source, and Borrower hereby agrees that no
such other funds will ever be deposited in the Donations Account or otherwise commingled therewith at any time or for any purpose whatsoever, provided  that it is understood and agreed that the service
fees payable to the Borrower derived from the Donations shall from time to time be deducted from the aggregate balance of the
deposited Donations and that such service fees shall upon designation as such no longer be considered part of the Donations (and thus such amount shall at such time constitute Collateral hereunder),  provided,
further, the amounts deposited in the Donations Account accrue interest and such interest shall be deemed Collateral hereunder. 

6.10   Subsidiaries.  

        Within 30 days of the Effective Date hereof, Borrower shall cause its Subsidiaries, referred to on Schedule 5.7 hereof, to execute and deliver to
Bank guaranty and security agreement documentation, in form reasonably acceptable to Bank, with respect to a guaranty of the Obligations hereunder secured by personal property assets of such parties
consistent in scope to the Collateral hereunder. 

6.11   Further Assurances.  

        Borrower will execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement. 

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7.     NEGATIVE COVENANTS  

        Borrower will not do any of the following without Bank's prior written consent, which will not be unreasonably delayed, conditioned or withheld, for so long as
Bank has an obligation to lend or there are any outstanding Obligations: 

7.1   Dispositions.  

        Convey, sell, lease, transfer or otherwise dispose of (collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or
property, except for Transfers (i) of Inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (iii) of worn-out, surplus or obsolete Equipment; or (iv) in
connection with Permitted Liens or Permitted Investments only as specifically permitted by the terms and provisions set forth in each of the definitions of Permitted Liens and Permitted Investments;
or (v) other Transfers which in the aggregate do not exceed $100,000 in any fiscal year, provided no such Transfers may be effected if a Default or Event of Default has occurred and is
continuing or would otherwise arise upon the making thereof. 

7.2   Changes in Business, Ownership, Management or Business Locations.  

        Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto or
have a material change in its management or its ownership of greater than 25% (other than by the sale of Borrower's equity securities in a public offering or to venture capital investors so long as
Borrower identifies the venture capital investors prior to the closing of the investment). Borrower will not, without at least 30 days prior written notice, relocate its chief executive office.
Borrower will not, without at least 10 days prior written notice, add any new offices or business locations in which Borrower maintains or stores over $10,000 in Borrower's assets or property. 

7.3   Mergers or Acquisitions.  

        Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person, except where: (i) no Default or Event of Default has occurred and is continuing or would result from such action
during the term of this Agreement; (ii) such transaction would not result in a decrease of more than 35% of Tangible Net Worth; and (iii) upon the acquisition of any other Person as
otherwise permitted pursuant to the terms of this Section, such Person become an appropriate obligor relating to the Obligations hereunder, as the Bank may determine, and shall execute such
agreements, documents and instruments as are reasonably necessary or appropriate, as the Bank may determine, in order to evidence such debt obligations and to establish a first priority security
interest in the personal property assets of such Person in favor of Bank, subject to Permitted Liens. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower as long as no
Default or Event of Default has occurred and is continuing prior thereto or arises thereafter. 

7.4   Indebtedness.  

        Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 

7.5   Encumbrance.  

        Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its
Subsidiaries to do so, except for 

10

 

Permitted
Liens, or permit the first priority lien status of Bank regarding the Collateral to change, subject only to Permitted Liens as may be applicable. 

7.6   Distributions; Investments.  

        Directly or indirectly acquire or own any Person, or make any investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries to do
so, with the understanding that the foregoing shall prohibit the transfer of any assets of Borrower to any of its Subsidiaries. Pay any dividends or make any distribution or payment or redeem, retire
or purchase any capital stock, except (i) for repurchases of stock from former employees or directors of Borrower under the terms of applicable repurchase agreements in an aggregate amount not
to exceed $250,000 in the aggregate in any fiscal year, provided that no Default or Event of Default has occurred, is continuing or would exist after giving effect to the repurchases; and
(ii) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, provided that any such
resulting other or otherwise exchanged-for securities do not have a redemption rights exercisable at the option of the holder thereof. 

7.7   Transactions with Affiliates.  

        Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary
course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a nonaffiliated Person. 

7.8   Subordinated Debt.  

        Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any document relating to the
Subordinated Debt without Bank's prior written consent. 

7.9   Compliance.  

        Become an "investment company" or a company controlled by an "investment company," under the Investment Company Act of 1940 or undertake as one of its important
activities extending credit to purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be
expected to have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 

7.10   No Further Negative Pledge Agreements.  

        Without limitation of any other term or condition set forth herein or in any other Loan Document, Borrower shall not enter into any agreements (other than in
favor of Bank) or transactions in which, or otherwise with respect to which, Borrower agrees not to encumber or create a Lien regarding its intellectual Property assets. 

11

   8.     EVENTS OF DEFAULT  

        Any one of the following is an "Event of Default" hereunder: 

8.1   Payment Default.  

        If Borrower fails to pay any of the Obligations within three (3) Business Days after their due date. During such additional three (3) Business Day
period the failure to cure such payment default is not an Event of Default hereunder (but no Credit Extension will be made during the cure period); 

8.2   Covenant Default.  

        (A)  If
Borrower does not perform any obligation in Section 6.2, 6.7, 6.8 or 6.10, or Borrower otherwise violates any covenant in Section 7; or 

        (B)  If
Borrower does not perform or observe any other material term, condition or covenant in this Agreement (other than relating to the matters addressed in
Section 8.1 and 8.2(A) above), any Loan Documents, or in any agreement between Borrower and Bank and as to any default under a term, condition or covenant that can be cured, has not cured the
default within 10 days after it occurs, or if the default cannot be cured within 10 days or cannot be cured after Borrower's attempts within 10 day period, and the default may be
cured within a reasonable time, then Borrower has an additional period (of not more than 30 days) to attempt to cure the default. During the additional time, the failure to cure the default is
not an Event of Default (but no Credit Extensions will be made during the cure period); 

8.3   Material Adverse Change.  

        If there (i) occurs a material adverse change in the business, operations, or condition (financial or otherwise) of the Borrower, or (ii) is a
material impairment of the prospect of repayment of any portion of the Obligations or (iii) is a material impairment of the value or priority of Bank's security interests in the Collateral (any
of the foregoing is referred to herein as a "Material Adverse Change"). 

8.4   Attachment.  

        If any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy
is not removed or terminated and is no longer in effect within 10 days of its attachment, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of
its business or if a judgment or other claim becomes a Lien on a material portion of Borrower's assets, or if a notice of lien, levy, or assessment is filed against any of Borrower's assets by any
government agency and not paid within 10 days after Borrower receives notice thereof. These are not Events of Default if stayed or if a bond is posted pending contest by Borrower (but no Credit
Extensions will be made during the cure period); 

8.5   Insolvency.  

        If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within 30 days (but no Credit Extensions will be made before any insolvency Proceeding is dismissed); 

8.6   Other Agreements.  

        If there is a default in any agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness exceeding $150,000
or that could cause a Material Adverse Change; 

12

 

8.7   Judgments.  

        If a money judgment(s) in the aggregate of at least $150,000 is rendered against Borrower and is unsatisfied or unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); 

8.8   Misrepresentations.  

        If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this
Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document; or 

8.9   Guaranty.  

        Any guaranty of any Obligations ceases for any reason to be in full force or any Guarantor does not perform any obligation under any guaranty of the Obligations,
or any material misrepresentation or material misstatement exists now or later in any warranty or representation in any guaranty of the Obligations or in any certificate delivered to Bank in
connection with the guaranty, or any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to any Guarantor. 

9.     BANK'S RIGHTS AND REMEDIES  

9.1   Rights and Remedies.  

        When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following: 

        (a)   Declare
all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable
without any action by Bank); 

        (b)   Stop
advancing money or extending credit for Borrower's benefit under this Agreement or under any other agreement between Borrower and Bank; 

        (c)   Settle
or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable; 

        (d)   Make
any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank
requires and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without
charge, to exercise any of Bank's rights or remedies; 

        (e)   Apply
to the Obligations any (i) balances and deposits of Borrower it holds (except with respect to the Donations and the Donations Account (but only with respect
to the Donations)), or (ii) any amount held by Bank owing to or for the credit or the account of Borrower; 

        (f)    Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is granted a non-exclusive,
royalty-free license or other right to use, without charge. Borrower's labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any 

13

 

Collateral
and, in connection with Bank's exercise of its rights under this Section. Borrower's rights under all licenses and all franchise agreements inure to Bank's benefit; and 

        (g)   Dispose
of the Collateral according to the Code. 

9.2   Power of Attorney.  

        Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name on
any checks or other forms of payment or security; (ii) sign Borrower's name on any invoice or bill of lading for any Account or drafts against account debtors, (iii) make, settle, and
adjust all claims under Borrower's insurance policies; (iv) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines
reasonable; and (v) transfer the Collateral into the name of Bank or a third party as the Code permits. Bank may exercise the power of attorney to sign Borrower's name on any documents
necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred. Bank's appointment as Borrower's attorney in fact, and all of Bank's
rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank's obligation to provide Credit Extensions terminates. 

9.3   Accounts Collection.  

        When an Event of Default occurs and continues, Bank may notify any Person owing Borrower money of Bank's security interest in the funds and verify the amount of
the Account. Borrower must collect all payments, other than with respect to the Donations, in trust for Bank and, if requested by Bank, immediately deliver the payments, other than with respect to the
Donations, to Bank in the form received from the account debtor, with proper endorsements for deposit. 

9.4   Bank Expenses.  

        If Borrower falls to pay any amount or furnish any required proof of payment to third persons, Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5, and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the
then applicable rate and secured by the Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank's waiver of any Event of Default. 

9.5   Bank's Liability for Collateral.  

        If Bank complies with reasonable banking practices and the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage
to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. Borrower bears all risk of loss,
damage or destruction of the Collateral. 

9.6   Remedies Cumulative.  

        Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the
Code, by law, or in equity. Bank's exercise of one right or remedy is not an election, and Bank's waiver of any Event of Default is not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given. 

14

 

9.7   Demand Waiver.  

        Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. 

10.   NOTICES  

        All notices or demands by any party about this Agreement or any other related agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile to the addresses set forth at the beginning of this Agreement. A party may change its notice address
by giving the other party written notice. If Bank gives a notice of default hereunder to Borrower via facsimile (although it is acknowledged that Bank has no obligation to do so), Bank agrees to use
commercially reasonably efforts to contact Borrower to obtain a facsimile number that Borrower prefers relating to the receipt of any such notice, provided Bank shall not be obligated to delay the
delivery thereof if Bank is unable to contact Borrower regarding the foregoing. 

11.   CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER  

        California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the
State and Federal courts in San Diego County, California. 

BORROWER
AND BANK EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN BANK AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF BANK OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS. ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH BANK OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 

12.   GENERAL PROVISIONS  

12.1   Successors and Assigns.  

        This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights under it
without Bank's prior written consent which may be granted or withheld in Bank's discretion. Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations, rights and benefits under this Agreement, provided that if Bank grants any
participation (as opposed to an outright sale of a portion of the Obligations hereunder) in Bank's rights and benefits under this Agreement, the Borrower shall only be required to deal with Bank with
respect to the administration of the transactions under this Agreement subject to customary terms and provisions relating to commercial lending participation agreements, including, without limitation,
by only being required to give any notices hereunder to Bank or take directions hereunder from Bank. 

15

 

12.2   Indemnification.  

        Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct. 

12.3   Time of Essence.  

        Time is of the essence for the performance of all obligations in this Agreement. 

12.4   Severability of Provision.  

        Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 

12.5   Amendments in Writing, Integration.  

        All amendments to this Agreement must be in writing and signed by Borrower and Bank. This Agreement represents the entire agreement about this subject matter, and
supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge
into this Agreement and the Loan Documents. 

12.6   Counterparts.  

        This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an
original, and all taken together, constitute one Agreement. 

12.7   Survival.  

        All covenants, representations and warranties made in this Agreement continue in full force while any Obligations (other than Obligations under
Section 12.2 to the extent they remain inchoate at the time of the payment or performance in full of the Obligations hereunder) remain outstanding. Borrower may terminate this Agreement at any
time upon five (5) days' prior written notice to Bank with indefeasible payment and performance in full of all outstanding Obligations. The obligations of Borrower in Section 12.2 to
indemnify Bank will survive until all statutes of limitations for any and all actions that may be brought against Bank have expired, as Bank shall reasonably determine. 

12.8   Confidentiality.  

        In handling any confidential information. Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank's subsidiaries or affiliates in connection with their business with Borrower, (ii) to prospective transferees or purchasers of any interest in the
loans (provided, however, Bank shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this provision), (iii) as required by
law, regulation, subpoena, or other order, (iv) as required in connection with Bank's examination or audit and (v) as Bank considers appropriate in exercising remedies under this
Agreement. In its good faith business judgment. Confidential information does not include information that either: (a) is in the public domain (other than as a direct result of the Bank's
wrongful disclosure of any such information) or in Bank's possession when disclosed to Bank, or becomes part of the public 

16

 

domain
after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. 

12.9   Attorneys' Fees, Costs and Expenses.  

        In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to any other relief to which it may be entitled. 

13.   DEFINITIONS  

13.1   Definitions.  

        In this Agreement: 

        "Accounts" are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale
or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower
and Borrower's Books relating to any of the foregoing. 

        "Affiliate" of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by
or is under common control with the Person, and each of that Person's senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person's managers and
members. 

        "Bank Expenses" are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys' fees and expenses) for
preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings). 

        "Borrower's Books" are all Borrower's books and records including ledgers, records regarding Borrower's assets or liabilities, the
Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information. 

        "Borrowing Base" is 80% of Eligible Accounts as determined and confirmed by Bank from Borrower's most recent Borrowing Base Certificate;  provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of Borrower's Collateral.
 

        "Business Day" is any day that is not a Saturday, Sunday or a day on which the Bank is closed. 

        "Cash Management Services" are defined in Section 2.1.2 hereof. 

        "Closing Date" is the date of this Agreement. 

        "Code" is the Uniform Commercial Code as enacted in California, as amended from time to time. 

        "Collateral" is the property described on Exhibit A. 

        "Committed Equipment Line" is an aggregate initial amount of Equipment Advances of up to One Million Dollars ($1,000,000). 

        "Committed Revolving Line" is an aggregate amount of Revolving Advances of up to One Million Dollars ($1,000,000), provided that on and
after the satisfaction of the Equity Event Condition, such aggregate amount shall be Two Million Dollars ($2,000,000). 

17

 

        "Contingent Obligation" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse
by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations
from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or
determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good
faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement. 

        "Credit Extension" is each Revolving Advance, Equipment Advance and each other extension of credit by Bank for Borrower's benefit. 

        "Current Assets" are amounts that under GAAP should be included on that date as current assets on Borrower's consolidated balance sheet. 

        "Current Liabilities" are the aggregate amount of Borrower's Total Liabilities which mature within one (1) year  less deferred revenue and less the amount of Donations. 

        "Default" shall mean any event or occurrence which with the passing of time or the giving of notice or both would become an Event of
Default hereunder. 

        "Donations" means those payments that Borrower processes from time to time for the benefit of its client companies pursuant to its
agreements with such Persons in connection with the operation of Borrower's business in the ordinary course. 

        "Donations Account" means the bank account presently maintained with City National Bank, bearing account number 0240005816, and any
successor or replacement account(s), and the products and
proceeds thereof, whether now existing or hereafter arising, wheresoever maintained, and into which Donations received for the benefit of others and ultimately disbursed by Borrower to such others,
are deposited. 

        "Effective Date" is the date Bank executes this Agreement. 

        "Eligible Accounts" are Accounts in the ordinary course of Borrower's business that meet all Borrower's representations and warranties in
this Agreement; but Bank may change eligibility standards by giving Borrower at least concurrent written notice thereof. Unless Bank agrees otherwise in
writing, Eligible Accounts will not include: 

        (a)   Accounts
that the account debtor has not paid within 90 days of invoice date; 

        (b)   Accounts
for an account debtor, 50% or more of whose Accounts have not been paid within 90 days of invoice date; 

        (c)   Credit
balances over 90 days from invoice date; 

        (d)   Accounts
for an account debtor, including Affiliates, whose total obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed that percentage, unless
the Bank approves in writing; 

        (e)   Accounts
for which the account debtor does not have its principal place of business in the United States or Canada; 

18

 

        (f)    Accounts
for which the account debtor is a federal, state or local government entity or any department, agency, or instrumentality; 

        (g)   Accounts
for which Borrower owes the account debtor, but only up to the amount owed (sometimes called "contra" accounts, accounts payable, customer deposits or credit
accounts); 

        (h)   Accounts
for demonstration or promotional equipment, or in which goods are consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or other terms
if account debtor's payment may be conditional; 

        (i)    Accounts
for which the account debtor is Borrower's Affiliate, officer, employee, or agent; 

        (j)    Accounts
in which the account debtor disputes liability or makes any claim and Bank believes there may be a basis for dispute (but only up to the disputed or claimed
amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes Insolvent, or goes out of business; and 

        (k)   Accounts
for which Bank reasonably determines collection to be doubtful. 

        "Eligible Equipment" shall mean Equipment consisting of manufacturing equipment, computer and office equipment and furnishings, acceptable
to Bank for advance purposes hereunder. 

        "Equipment" is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest. 

        "Equipment Advance" is defined in Section 2.1.3. 

        "Equipment Availability End Date" is defined in Section 2.1.3. 

        "Equity Event Condition" shall mean the following on a collective basis: (1) Borrower has consummated, on and after the date
hereof, a transaction consisting of private equity financing, an underwritten initial public offering of the Borrower's common stock or a Subordinated Debt transaction, from any of which or
combination of which Borrower receives at least $15,000,000 in gross proceeds and (2) Borrower has supplied evidence satisfactory to Bank of the foregoing. 

        "Equipment Maturity Date" is defined in Section 2.1.3. 

        "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations. 

        "GAAP" is generally accepted accounting principles, consistently applied. 

        "Guarantor" is any present or future guarantor of the Obligations. 

        "Indebtedness" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and
other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and
(d) Contingent Obligations. 

        "Insolvency Proceeding" are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or
insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. 

19

 

        "Intellectual Property" is: 

        (a)   copyrights,
trademarks, patents, and mask works including amendments, renewals, extensions, and all licenses or other rights to use and all license fees and royalties
from the use; 

        (b)   Any
trade secrets and any intellectual property rights in computer software and computer software products now or later existing, created, acquired or held; 

        (c)   All
design rights which may be available to Borrower now or later created, acquired or held; and 

        (d)   Any
claims for damages (past, present or future) for infringement of any of the rights above, with the right, but not the obligation, to sue and collect damages for use
or infringement of the intellectual property rights above. 

        "Inventory" is present and future inventory in which Borrower has any Interest, including merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of Borrower,
Including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or disposition of
any of the foregoing and any documents of title. 

        "Investment" is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance
or capital contribution to any Person. 

        "IPO" shall mean an initial public offering of the common stock of Borrower effected pursuant to a Registration Statement on
Form S-1 (or its successor) filed under the Securities Act of 1933, as amended, from which transaction Borrower receives gross proceeds in the minimum amount of Fifteen Million
Dollars ($15,000,000). 

        "Lien" is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. 

        "Loan Documents" are, collectively, this Agreement, any note, or notes or guaranties or third party suretyship obligations in favor of
Bank executed by Borrower or other Persons, as applicable, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended,
extended or restated. 

        "Material Adverse Change" is defined in Section 8.3. 

        "Non-SVB Accounts" is defined in Section 6.6. 

        "Obligations" are debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, including cash management
services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to
Bank. 

        "Permitted Indebtedness" is: 

        (a)   Borrower's
indebtedness to Bank under this Agreement or any other Loan Document; 

        (b)   Indebtedness
existing on the Closing Date and shown on the Schedule; 

        (c)   Subordinated
Debt; 

        (d)   Indebtedness
to trade creditors incurred in the ordinary course of business; 

20

 

        (e)   Indebtedness
secured by Permitted Liens; 

        (f)    Other
Indebtedness not otherwise permitted by Section 7.4 not exceeding $350,000 in the aggregate outstanding at any time; and 

        (g)   Extensions,
refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be. 

        "Permitted Investments" are: 

        (a)   Investments
shown on the Schedule and existing on the Closing Date; and 

        (b)   (i) marketable
direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., and (iii) Bank's certificates of deposit issued maturing no more than 1 year after issue and (iv) any Investments permitted by Borrower's investment policy,
as amended from time to time, provided that such investment policy (and any such amendment thereto) as approved by the Board of Directors of the Borrower and as provided to the Bank; 

        (c)   Investments
consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower; 

        (d)   Investments
accepted in connection with Transfers permitted by Section 7.1; 

        (e)   Investments
of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed $100,000 in the aggregate in any fiscal
year, provided that any such new Investments shall not be permitted to be made at such time as a Default or Event of Default is then occurring or would arise upon the making thereof. 

        (f)    Investments
consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by
Borrower's Board of Directors; 

        (g)   Investments
(including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; 

        (h)   Investments
consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary
course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary; 

        (i)    Joint
ventures or strategic alliances in the ordinary course of Borrower's business consisting of the non-exclusive licensing of technology, the development
of technology or the providing of technical support, provided that any cash investments by Borrower do not exceed $100,000 in the aggregate in any fiscal year, provided that any such new Investments
shall not be permitted to be made at such time as a Default or Event of Default is then occurring or would arise upon the making thereof; and 

        (j)    Other
Investments not otherwise permitted by Section 7.7 not exceeding $100,000 in the aggregate outstanding at any time, provided that any such new Investments
shall not be 

21

 

permitted
to be made at such time as a Default or Event of Default is then occurring or would arise upon the making thereof. 

        "Permitted Liens" are: 

        (a)   Liens
existing on the Closing Date and shown on the Schedule or arising under this Agreement or other Loan Documents; 

        (b)   Liens
for fees, taxes, levies, imposts, duties or other governmental charges of any kind which are not yet delinquent or which are being contested in good faith by
appropriate proceedings which suspend the collection thereof (provided, however, that such appropriate proceedings do not involve any substantial danger
of the sale, forfeiture or loss of any material item of Collateral which in the aggregate is material to Borrower and that Borrower has adequately bonded such Lien or reserves sufficient to discharge
such Lien have been provided on the books of Borrower); 

        (c)   Purchase
money Liens or Liens arising in connection with operating leases (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing
the acquisition of the Equipment or (ii) existing on equipment when acquired, if, in each of (i) and (ii) above, the Lien is
confined to the property and improvements and the proceeds of the equipment; 

        (d)   Non-exclusive
licenses or sublicenses granted in the ordinary course of Borrower's business and, with respect to any licenses where Borrower is the licensee,
any interest or title of a licensor or under any such license or sublicense, if the licenses and sublicenses permit granting Bank a security interest; 

        (e)   Leases
or subleases entered into in the ordinary course of Borrower's business, including in connection with Borrower's leased premises or leased property; 

        (f)    Liens
arising from judgments, decrees or attachments which do not constitute an Event of Default (with the understanding that the matter or occurrence giving rise to any
such Lien may, pursuant to the terms hereof, nevertheless constitute an immediate Event of Default hereunder pursuant to the other terms and provisions hereof and the status of the resulting Lien as a
Permitted Lien hereunder for any period of time shall not be deemed to derogate therefrom); 

        (g)   carriers',
warehousemen's, mechanics', materialmen's, repairmen's, worker's compensation, employment insurance, social security or other similar Liens relating to
statutory obligations arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings
(provided, however, that such appropriate proceedings do not involve any substantial danger of the sale, forfeiture or loss of any material item of
Collateral or Collateral which in the aggregate is material to Borrower and that Borrower has adequately bonded such Lien or reserves sufficient to discharge such Lien have been provided on the books
of Borrower); 

        (h)   Liens
in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods; and 

        (i)    Liens
incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c),  but any extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness may not increase. 

        "Person" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust,
unincorporated organization, association, corporation, 

22

 

institution,
public benefit corporation, firm, joint stock company, estate, entity or government agency. 

        "Prime Rate" is Bank's most recently announced "prime rate," even if it is not Bank's lowest rate. 

        "Quick Assets" is, on any date, the Borrower's consolidated, unrestricted cash, cash equivalents, net billed accounts receivable and
investments with maturities of fewer than 12 months determined according to GAAP. 

        "Responsible Officer" is each of the Chief Executive Officer, the President and the Chief Financial Officer of Borrower. 

        "Revolving Advance" or "Revolving Advances" is a loan advance (or advances) under the
Committed Revolving Line. 

        "Revolving Maturity Date" is September 2, 2004. 

        "Rights", as applied to the Collateral, means the Borrower's rights and interests in, and powers with respect to, that Collateral,
whatever the nature of those rights, Interests and powers and, in any event, including Borrower's power to transfer rights in such Collateral to Bank. 

        "Schedule" is any attached schedule of exceptions. 

        "Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in writing. 

        "Subsidiary" is for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned
or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person. 

        "Tangible Net Worth" is, on any date, the consolidated total assets of Borrower and its Subsidiaries  minus, without duplication, (i) any amounts attributable to
(a) goodwill, (b) intangible items such as unamortized debt discount
and expense, patents, trade and service marks and names, copyrights and research and development expenses except prepaid expenses, and (c) reserves not already deducted from assets,  and
(ii) Total Liabilities. 

        "Total Liabilities" is, on any day, obligations that should, under GAAP, be classified as liabilities on Borrower's consolidated balance
sheet, including all indebtedness, and current portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt. 

23

 

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

	 	 	BORROWER:
	

 	
 	

Kintera, Inc.
	

 	
 	

By:	

/s/  HARRY GRUBER      

	

 	
 	

Title:	

CEO

	

 	
 	

Kintera, Inc.
	

 	
 	

By:	

/s/  JAMES A. ROTHERHAM      

	

 	
 	

Title:	

Chief Financial Officer

	

 	
 	

BANK:
	

 	
 	

SILICON VALLEY BANK
	

 	
 	

By:	

/s/  R. CUNNINGHAM      

	

 	
 	

Title:	

VP

	

Effective Date:	
 	

 	

 

24

 
 

EXHIBIT A    
    

        The Collateral consists of all of Borrower's right, title and interest in and to the following personal property of Borrower: 

        All
goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any
of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; 

        All
inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and
finished products including such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returns upon any accounts or other proceeds, including Insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above; 

        All
contract rights and general intangibles now owned or hereafter acquired, including the Intellectual Property (as defined below) only, however, to the extent and subject to the
limitations set forth in the Exclusion Clause (as defined below); 

        All
now existing and hereafter arising accounts, contract rights, payment intangibles, royalties, license rights and all other forms of obligations owing to Borrower arising out of the
sale or lease of goods, the licensing of technology or the rendering of services by Borrower, whether or not earned by performance, and any and all credit Insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower; 

        All
documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit,
letter-of-credit rights, commercial tort claims, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Borrower's Books relating to the
foregoing; and 

        All
Borrower's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds
thereof. 

        Notwithstanding
the foregoing, the Collateral shall not include any Intellectual Property, provided that if a judicial authority
(including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in such items that are proceeds of the Intellectual
Property consisting of payment intangibles, accounts, license revenues, or general intangibles relating to rights to payment arising therefrom or relating thereto, then in such circumstance, the
Collateral shall automatically, and effective as of the Closing Date, include the Intellectual Property only to the extent necessary to permit perfection of Bank's security interest in such proceeds,
including, without limitation, payment intangibles, accounts, license revenues, or general intangibles relating to rights to payment (the foregoing is referred to herein collectively as the
"Exclusion Clause"). 

        Further,
Borrower and Bank are parties to that certain Negative Pledge Agreement, whereby Borrower, in connection with Bank's loans, has agreed, among other things, not to sell,
transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber, any of its Intellectual Property, without the Bank's prior written consent, other than as may be permitted
thereunder or hereunder. 

        The
term "Intellectual Property" as used herein shall mean the following: Borrower's right, title or interest, whether now owned or
hereafter acquired, in and to any intellectual property rights of Borrower of any nature or character, including without limitation, and whether domestic or foreign, the following: (i) any
copyrights and copyright applications, whether registered or unregistered, copyright registration and like protection in each work of authorship and derivative work thereof, whether published or
unpublished, and whether said copyrights are statutory or arise under common law, and all rights, claims and demands in any way related to any such copyrights or works, including any rights to sue for
past, present or future infringement, and any rights of renewal and extension of copyrights; 

(ii) any
patents, patent applications, patent rights and like protections and any licenses relating to any of the foregoing, and any improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part thereof and any rights to sue for past present or future infringement thereof and any rights arising therefrom and pertaining thereto;
(iii) any state (including common law), federal and foreign trademarks, service marks and trade names, and applications for registration of such trademarks, service marks and trade names, and
any licenses relating to any of the foregoing, whether registered or unregistered and wherever registered, any rights to sue for past, present or future infringement of unconsented use thereof, all
rights arising therefrom and pertaining and any reissues, extensions and renewals thereof and the goodwill of the business of Borrower connected with and symbolized by any of the foregoing;
(iv) any trade secrets, trade dress, trade styles, logos, other source of business identifiers, mask-works, mask-work registrations or mask-work
applications, integrated circuit masks, software, circuit designs and documentation relating thereto, and the goodwill of the business of Borrower connected with and symbolized by any of the
foregoing, including, without limitation, any rights to unpatented inventions, know-how, and operating manuals, including any rights to sue for past, present or future infringement or
unconsented use thereof, all rights arising therefrom and pertaining thereto, provided that with respect to any and all of the foregoing, the term
"Intellectual Property" shall not include any proceeds thereof (other than proceeds in the direct form of Intellectual Property) and specifically, without limitation, and regardless of any of the
foregoing, the term "Intellectual Property" shall not include any payment intangibles, accounts, license revenues, or general intangibles relating to
rights to payment arising therefrom or relating thereto. 

Notwithstanding
the foregoing, the security interest granted herein does not extend to and the term "Collateral" does not include the Donations and the Donations Account (but only to the extent of the
Donations) and the products and proceeds thereof, whether now existing or hereafter arising, and wheresoever maintained. 

 
 

NEGATIVE PLEDGE AGREEMENT    
    

        This Negative Pledge Agreement is made as of September 2, 2003, by and between Kintera, Inc. ("Borrower")
and Silicon Valley Bank ("Bank"). 

        In
connection with, among other documents, the Loan and Security Agreement dated of even date herewith (referred to herein as the "Loan Documents") being concurrently executed herewith
between Borrower and Bank, Borrower agrees as follows: 

        1.     Except
as otherwise permitted under the Loan Documents (including without limitation that the Borrower is permitted to grant non-exclusive licenses and
similar arrangements in the ordinary course of business), Borrower shall not sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of Borrower's intellectual
property, including, without limitation, the following: 

        a.     Any
and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held; 

        b.     Any
and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired
or held; 

        c.     Any
and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held; 

        d.     All
patents, patent applications and like protections including, without limitation, improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, including without limitation the patents and patent applications; 

        e.     Any
trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of
the business of Borrower connected with and symbolized by such trademarks, including without limitation; 

        f.      Any
and all claims for damages by way of past, present and future infringements of any of the rights included above, with the right, but not the obligation, to sue for
and collect such damages for said use or infringement of the intellectual property rights identified above; 

        g.     All
licenses or other rights to use any of the foregoing copyrights, patents or trademarks, and all license fees and royalties arising from such use to the extent
permitted by such license or rights; and 

        h.     All
amendments, extensions, renewals and extensions of any of the foregoing copyrights, trademarks or patents; and 

        i.      All
proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the
foregoing; 

        2.     It
shall be an event of default under the Loan Documents between Borrower and Bank if there is a breach of any term of this Negative Pledge Agreement. 

 

        3.     Capitalized
terms used but not otherwise defined herein shall have the same meaning as in the Loan Documents. 

	 	 	BORROWER:
	

 	
 	

KINTERA, INC.
	

 	
 	

By:	

/s/  HARRY GRUBER      

	

 	
 	

Name:	

Harry Gruber

	

 	
 	

Title:	

CEO

	

 	
 	
KINTERA, INC.
	

 	
 	

By:	

/s/  JAMES A. ROTHERHAM      

	

 	
 	

Name:	

James A. Rotherham

	

 	
 	

Title:	

Chief Financial Officer

	

 	
 	
BANK:
	

 	
 	

SILICON VALLEY BANK
	

 	
 	

By:	

/s/  R. CUNNINGHAM      

	

 	
 	

Name:	

Raquel Cunningham

	

 	
 	

Title:	

VP

2

 
 

WARRANT TO PURCHASE STOCK    
    

THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE
PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE
OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION. 

	Company:	 	Kintera, Inc., a Delaware corporation
	Number of Shares:	 	40,000
	Class of Stock:	 	Series G Convertible Preferred
	Warrant Price:	 	$5.00 Per Share
	Issue Date:	 	September 2, 2003
	Expiration Date:	 	The later to occur of (A) ten years following the issue date or (B) five (5) years after the closing of the initial public offering of the common stock of Kintera, Inc., a Delaware corporation (the "IPO") effected
pursuant to a Registration Statement on Form S-1 (or its successor) filed under the Securities Act of 1933, as amended (the "Act").

        THIS
WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good and valuable consideration, SILICON VALLEY BANK ("Holder") is entitled to purchase the number of fully
paid and nonassessable shares of the class of securities (the "Shares") of the company (the "Company") at the Warrant Price, all as set forth above and as adjusted pursuant to Article 2 of this
Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. 

ARTICLE
1.    EXERCISE.    

        1.1    Method of Exercise.    Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in
substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Article 1.2, Holder shall also deliver
to the Company a check, wire transfer (to an account designated by the Company), or other from of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased. 

        1.2    Conversion Right.    In lieu of exercising this Warrant as specified in Article 1.1, Holder may from
time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share at the time of conversion. The fair market value of the Shares shall be
determined pursuant to Article 1.3. 

        1.3    Fair Market Value.    If the Company's common stock is traded in a public market and the shares are common
stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the
instance where the Warrant is exercised immediately prior to the effectiveness of the Company's initial public offering, the "price to public" per share price specified in the final prospectus
relating to such offering). If the Company's common stock is traded in a public market and the Shares are preferred stock, the fair market value of a Share shall be the closing price of a share of the
Company's common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or, in the instance where the Warrant is exercised immediately prior to
the effectiveness of the Company's initial public offering, the initial "price to public" per share price specified in the final prospectus relating to such offering), in both cases, multiplied by the
number of shares of the Company's common stock into which a Share is convertible. If the Company's common 

 

stock
is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment. 

        1.4    Delivery of Certificate and New Warrant.    Promptly after Holder exercises or converts this Warrant and, if
applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant representing the Shares not so acquired. 

        1.5    Replacement of Warrants.    On receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, or surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor. 

        1.6    Treatment of Warrant Upon Acquisition of Company.    

        1.6.1    "Acquisition".    For the purpose of this Warrant, "Acquisition" means any sale, license, or other
disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company's securities before the
transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction. 

        1.6.2    Treatment of Warrant at Acquisition.    

        A)   Upon
the written request of the Company, Holder agrees that, in the event of an Acquisition in which the sole consideration is cash, either (a) Holder shall
exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to
exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide the Holder with written notice of its request relating to the foregoing (together
with such reasonable information as the Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten
(10) days prior to the closing of the proposed Acquisition. 

        B)    Upon
the written request of the Company, Holder agrees that, in the event of an Acquisition that is an "arms length" sale of all or substantially all of the Company's
assets (and only its assets) to a third party that is not an Affiliate (as defined below) of the Company (a "True Asset Sale"), either (a) Holder shall exercise its conversion or purchase right
under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will
continue until the Expiration Date if the Company continues as a going concern following the closing of any such True Asset Sale. The Company shall provide the Holder with written notice of its
request relating to the foregoing (together with such reasonable information as the Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be
delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition. 

        C)    Upon
the closing of any Acquisition other than those particularly described in subsections (A) and (B) above, the successor entity shall assume the
obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of
this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly. 

2

 

As
used herein "Affiliate" shall mean any person or entity that owns or controls directly or indirectly ten (10) percent or more of the stock of
Company, any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person's or entity's officers, directors, joint venturers or
partners, as applicable. 

ARTICLE
2.    ADJUSTMENTS TO THE SHARES.    

        2.1    Stock Dividends, Splits, Etc.    If the Company declares or pays a dividend on the Shares payable in common
stock, or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would
have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification or otherwise into a greater number of shares or
takes any other action which increase the amount of stock into which the Shares are convertible, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price
shall be proportionately decreased. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately
increased and the number of Shares shall be proportionately decreased. 

        2.2    Reclassification, Exchange, Combinations or Substitution.    Except as otherwise provided in
Section 1.6.2 above, upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion
of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this
Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company's Certificate of Incorporation upon the closing of a registered public offering
of the Company's common stock. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property
issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities
issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of
the new Warrant. The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events. 

        2.3    Adjustments for Diluting Issuances.    The Warrant Price and the number of Shares issuable upon exercise of
this Warrant or, if the Shares are Preferred Stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set
forth in the Company's Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the
Company's Certificate of Incorporation relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment,
modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series
and class as the Shares granted to the Holder. 

        2.4    No Impairment.    The Company shall not, by amendment of its Certificate of Incorporation or through a
reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, except in a manner that does not affect Holder in a manner
differently from the effect on other holders of other shares of the same series and class as the Shares, avoid or seek to avoid the observance or performance of any of the terms to be observed or
performed 

3

 

under
this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or
appropriate to protect Holder's rights under this Article against impairment. 

        2.5    Fractional Shares.    No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the
number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share. 

        2.6    Certificate as to Adjustments.    Upon each adjustment of the Warrant Price, the Company shall promptly notify
Holder in writing, and, at the Company's expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts
upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price. 

ARTICLE
3.    REPRESENTATIONS AND COVENANTS OF THE COMPANY.    

        3.1    Representations and Warranties.    The Company represents and warrants to the Holder as follows: 

        (a)   The
initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which the Shares were last issued in an
arms-length transaction in which at least $500,000 of the Shares were sold. 

        (b)   All
Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares,
shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under
applicable federal and state securities laws. 

        (c)   The
Capitalization Table previously provided to Holder remains true and complete as of the Issue Date. 

        3.2    Notice of Certain Events.    If the Company proposes at any time (a) to declare any dividend or
distribution upon any of its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for sale additional shares of any class or
series of the Company's stock to the holders of the same series of stock as the Shares; (c) to effect any reclassification or recapitalization of any of its stock; (d) to merge or
consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of
registration rights the opportunity to participate in an underwritten public offering of the company's securities for cash, then, in connection with each such event, the Company shall give Holder:
(1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the
holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the
matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in
(e) above, the same notice as is given to the holders of such registration rights. 

4

 

        3.3    Representation Regarding Registration Rights.    The Company represents and warrants to the Holder that it has
in effect no agreement granting to any party holder securities in the Company registration rights with respect thereto. 

        3.4    No Shareholder Rights.    Except as provided in this Warrant, the Holder will not have any rights as a
shareholder of the Company until the exercise of this Warrant. 

ARTICLE
4.    REPRESENTATIONS, WARRANTIES OF THE HOLDER.    The Holder represents and warrants to the Company as follows: 

        4.1    Purchase for Own Account.    This Warrant and the securities to be acquired upon exercise of this Warrant by
the Holder will be acquired for investment for the Holder's account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also
represents that the Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares. 

        4.2    Disclosure of Information.    The Holder has received or has had full access to all the information it
considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. The Holder further has had an opportunity to
ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Holder or to which the Holder has access. 

        4.3    Investment Experience.    The Holder understands that the purchase of this Warrant and its underlying
securities involves substantial risk. The Holder has experience as an investor in securities of companies in the development stage and acknowledges that the Holder can bear the economic risk of such
Holder's investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that the Holder is capable of evaluating the merits and risks
of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling
persons of a nature and duration that enables the Holder to be aware of the character, business acumen and financial circumstances of such persons. 

        4.4    Accredited Investor Status.    The Holder is an "accredited investor" within the meaning of Regulation D
promulgated under the Act. 

        4.5    The Act.    The Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof
have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder's investment intent as
expressed herein. The Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the 1933 Act and
qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. 

        4.6    Market Stand-Off Agreement.    In connection with any underwritten public offering by the Company
of its equity securities pursuant to an effective registration statement filed under the Act, including the Company's initial public offering of equity securities, the Holder shall not directly or
indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or
otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares without the prior written consent of the Company and its underwriters. Such
restriction (the "Market Stand-Off") shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such
underwriters. In no event, however, shall such 

5

 

period
exceed 270 days for any underwritten public offering. The Market Stand-Off restrictions set forth in this paragraph, in regards to any particular offering, shall in any event
terminate, as to all underwritten public offerings by the Company so requested by the Company or underwriters, 540 days after the date of the final prospectus for the Company's initial public
offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any stock subject
to the Market Stand-Off, or into which such stock thereby becomes convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the stock until the end of the applicable stand-off period for such offering. The
Company will do all that is necessary to remove by expiration of the applicable stand-off period such stop-transfer instructions and all appropriate legends on stock
certificates. The Company's underwriters shall be beneficiaries of the agreement set forth in this Section 4.6. This Section 4.6 shall not apply to any shares of the stock registered in
the public offering of the Company under the Act nor to any transferee of the shares of the stock purchased from the Holder thereafter. Further, the Company hereby represents and warrants to the
Holder that the terms of the provisions set forth in this Section 4.6 are consistent with, and not more detrimental to the Holder hereof than, similar provisions applicable to all other
investors of securities of the Company. 

ARTICLE
5.    MISCELLANEOUS.    

        5.1    Term:    This Warrant is exercisable in whole or in part at any time and from time to time on or before the
Expiration Date. 

        5.2    Legends.    This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion
of the Shares, if any) shall be imprinted with a legend in substantially the following form: 

THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE ACT, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION. 

        5.3    Compliance with Securities Laws on Transfer.    This Warrant and the Shares issuable upon exercise of this
Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal
and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to Silicon Valley Bancshares (Holder's parent company) or any
other affiliate of Holder. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and
the Company is provided with a copy of Holder's notice of proposed sale. 

        5.4    Transfer Procedure.    Upon receipt by Holder of the executed Warrant, Holder will transfer all of this Warrant
to Silicon Valley Bancshares, Holder's parent company, by execution of an Assignment 

6

 

substantially
in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing Company with written notice, Silicon Valley Bancshares and any subsequent Holder
which makes to the Company the Representations and Warranties in Section 4 may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable
directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, Silicon Valley Bancshares or any subsequent Holder will give
the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for
reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case,
the stock of the Company is publicly traded. 

        5.5    Notices.    All notices and other communications from the Company to the Holder, or vice versa, shall be deemed
delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the
case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such holder from time to time. Effective upon receipt of the fully executed Warrant and
the initial transfer described in Article 5.4 above, all notices to the Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a
transfer or otherwise: 

Silicon
Valley Bancshares

Attn: Treasury Department

3003 Tasman Drive, HA 200

Santa Clara, CA 95054

Telephone: 408-654-7400

Facsimile: 408-496-2405 

        Notice
to the Company shall be addressed as follows until the Holder receives notice of a change in address: 

Kintera, Inc.

9605 Scranton Rd., Ste 240

San Diego, CA 92121

Attn: CFO

Telephone: (858) 795-3000

Facsimile: (858) 795-3010 

        5.6    Waiver.    This Warrant and any term hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. 

        5.7    Attorney's Fees.    In the event of any dispute between the parties concerning the terms and provisions of this
Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney's fees. 

        5.8    Automatic Conversion upon Expiration.    In the event that, upon the Expiration Date, the fair market value of
one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Exercise Price in effect on such date, then this Warrant
shall automatically be deemed on and as of such date to be converted pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been
exercised or converted, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such conversion to the Holder. 

7

 

        5.9    Counterparts.    This Warrant may be executed in counterparts, all of which together shall constitute one and
the same agreement. 

        5.10    Governing Law.    This Warrant shall be governed by and construed in accordance with the laws of the State of
California, without giving effect to its principles regarding conflicts of law. 

	"COMPANY"	 	 	 
	

KINTERA, INC.	
 	

KINTERA, INC.
	

By:	

/s/  HARRY GRUBER      
	
 	

By:	

/s/  JAMES A. ROTHERHAM      

	

Name:	

Harry Gruber
 (Print)	
 	

Name:	

James A. Rotherham
 (Print)
	

Title:	

Chairman of the Board, President or Vice President	
 	

Title:	

Chief Financial Officer, Secretary, Assistant Treasurer or Assistant Secretary
	

"HOLDER"	
 	

 	

 
	

SILICON VALLEY BANK	
 	

 	

 
	

By:	

/s/  R. CUNNINGHAM      
	
 	

 	

 
	

Name:	

Raquel Cunningham
 (Print)	
 	

 	

 
	

Title:	

VP	
 	

 	

 

8

QuickLinks

EXHIBIT A

NEGATIVE PLEDGE AGREEMENT

WARRANT TO PURCHASE STOCKEXHIBIT 4.1

 

 

 

 

GRIFFON CORPORATION

 

 

4.0% Contingent Convertible
Subordinated Notes Due 2023

 

 

INDENTURE

 

 

American Stock Transfer & Trust Company,
as Trustee

 

 

Dated as of July 18, 2003

 

 

 

 

CROSS-REFERENCE TABLE*

 

	
  Trust Indenture Act Section

  	
   

  	
  Indenture
  Section

  
	
   

  	
   

  	
   

  
	
  310(a)(1)

  	
   

  	
  7.10

  
	
  (a)(2)

  	
   

  	
  N.A.

  
	
  (a)(3)

  	
   

  	
  N.A.

  
	
  (a)(4)

  	
   

  	
  N.A.

  
	
  (a)(5)

  	
   

  	
  N.A.

  
	
  (b)

  	
   

  	
  7.10

  
	
  (c)

  	
   

  	
  N.A.

  
	
  311(a)

  	
   

  	
  7.11

  
	
  (b)

  	
   

  	
  7.11

  
	
  (c)

  	
   

  	
  N.A.

  
	
  312(a)

  	
   

  	
  N.A.

  
	
  (b)

  	
   

  	
  12.03

  
	
  (c)

  	
   

  	
  12.03

  
	
  313(a)

  	
   

  	
  7.06

  
	
  (b)

  	
   

  	
  7.06

  
	
  (b)

  	
   

  	
  7.06

  
	
  (c)

  	
   

  	
  N.A.

  
	
  (d)

  	
   

  	
  N.A.

  
	
  314(a)

  	
   

  	
  4.02, 4.03

  
	
  (b)

  	
   

  	
  N.A.

  
	
  (c)(1)

  	
   

  	
  11.04

  
	
  (c)(2)

  	
   

  	
  11.04

  
	
  (c)(3)

  	
   

  	
  N.A.

  
	
  (d)

  	
   

  	
  N.A.

  
	
  (e)

  	
   

  	
  N.A.

  
	
  (f)

  	
   

  	
  N.A.

  
	
  315(a)

  	
   

  	
  7.01(b)

  
	
  (b)

  	
   

  	
  7.05

  
	
  (c)

  	
   

  	
  N.A.

  
	
  (d)

  	
   

  	
  7.01(c)

  
	
  (e)

  	
   

  	
  6.11

  
	
  316(a)(1)(A)

  	
   

  	
  6.05

  
	
  (a)(1)(B)

  	
   

  	
  6.04

  
	
  (a)(2)

  	
   

  	
  N.A.

  
	
  (b)

  	
   

  	
  N.A.

  
	
  (c)

  	
   

  	
  N.A.

  
	
  317(a)(1)

  	
   

  	
  N.A.

  
	
  (a)(2)

  	
   

  	
  N.A.

  
	
  (b)

  	
   

  	
  N.A.

  
	
  318(a)

  	
   

  	
  N.A.

  

 

N.A. means not applicable.

 

* This Cross-Reference Table is not part of the Indenture.

 

i

 

TABLE OF CONTENTS

 

	
  ARTICLE
  1 DEFINITIONS AND INCORPORATION BY REFERENCE

  
	
   

  
	
  Section 1.01. Definitions

  
	
  Section 1.02. Other Definitions

  
	
  Section 1.03. Incorporation by Reference of Trust Indenture Act

  
	
  Section 1.04. Rules of Construction

  
	
  Section 1.05. Acts of Holders

  
	
   

  
	
  ARTICLE 2 THE SECURITIES

  
	
   

  
	
  Section 2.01. Form and Dating

  
	
  Section 2.02. Execution and Authentication

  
	
  Section 2.03. Registrar, Paying Agent and Conversion Agent

  
	
  Section 2.04. Paying Agent to Hold
  Money in Trust

  
	
  Section 2.05. Holder Lists

  
	
  Section 2.06. Transfer and Exchange

  
	
  Section 2.07. Replacement Securities

  
	
  Section 2.08. Outstanding Securities;
  Determinations of Holders’ Action

  
	
  Section 2.09. Temporary Securities

  
	
  Section 2.10. Cancellation

  
	
  Section 2.11. Persons Deemed Owners

  
	
  Section 2.12. Global Securities

  
	
  Section 2.13. CUSIP Numbers

  
	
   

  
	
  ARTICLE 3 REDEMPTION AND PURCHASES

  
	
   

  
	
  Section 3.01. Right To Redeem; Notices
  To Trustee

  
	
  Section 3.02. Selection of Securities
  to Be Redeemed

  
	
  Section 3.03. Notice of Redemption

  
	
  Section 3.04. Effect of Notice of
  Redemption

  
	
  Section 3.05. Deposit of Redemption Price

  
	
  Section 3.06. Securities Redeemed in Part

  
	
  Section 3.07. Sinking Fund

  
	
  Section 3.08. Purchase of Securities at Option of the Holder

  
	
  Section 3.09. Purchase of Securities
  at Option of the Holder upon Change in Control

  
	
  Section 3.10. Effect of Purchase
  Notice or Change in Control Purchase Notice

  
	
  Section 3.11. Deposit of Purchase
  Price or Change in Control Purchase Price

  
	
  Section 3.12. Securities Purchased in
  Part

  
	
  Section 3.13. Covenant to Comply with
  Securities Laws upon Purchase of Securities

  
	
  Section 3.14. Repayment to the Company

  
	
   

  
	
  ARTICLE 4 COVENANTS

  
	
   

  
	
  Section 4.01. Payment of Securities

  
	
  Section 4.02. SEC and Other Reports

  
	
  Section 4.03. Compliance Certificate

  

 

ii

 

	
  Section 4.04. Further Instruments and
  Acts

  
	
  Section 4.05. Maintenance of Office or
  Agency

  
	
  Section 4.06. Delivery of Certain
  Information

  
	
  Section 4.07. Tax Treatment of
  Securities

  
	
  Section 4.08. Liquidated Damages

  
	
   

  
	
  ARTICLE 5 SUCCESSOR CORPORATION

  
	
   

  
	
  Section 5.01. When the Company
  May Merge or Transfer Assets

  
	
   

  
	
  ARTICLE 6 DEFAULTS AND REMEDIES

  
	
   

  
	
  Section 6.01. Events of Default

  
	
  Section 6.02. Acceleration

  
	
  Section 6.03. Other Remedies

  
	
  Section 6.04. Waiver of Past Defaults

  
	
  Section 6.05. Control by Majority

  
	
  Section 6.06. Limitation on Suits

  
	
  Section 6.07. Rights of Holders to
  Receive Payment

  
	
  Section 6.08. Collection Suit by
  Trustee

  
	
  Section 6.09. Trustee May File Proofs of Claim

  
	
  Section 6.10. Priorities

  
	
  Section 6.11. Suits

  
	
  Section 6.12. Waiver of Stay, Extension or Usury Laws

  
	
   

  
	
  ARTICLE 7 TRUSTEE

  
	
   

  
	
  Section 7.01. Duties of Trustee

  
	
  Section 7.02. Rights of Trustee

  
	
  Section 7.03. Individual Rights of Trustee

  
	
  Section 7.04. Trustee’s Disclaimer

  
	
  Section 7.05. Notice of Defaults

  
	
  Section 7.06. Reports by Trustee to
  Holders

  
	
  Section 7.07. Compensation and
  Indemnity

  
	
  Section 7.08. Replacement of Trustee

  
	
  Section 7.09. Successor Trustee by
  Merger Etc

  
	
  Section 7.10. Eligibility; Disqualification

  
	
  Section 7.11. Preferential Collection
  of Claims Against Company

  
	
   

  
	
  ARTICLE 8 DISCHARGE OF INDENTURE

  
	
   

  
	
  Section 8.01. Discharge of Liability
  on Securities

  
	
  Section 8.02. Repayment to the Company

  
	
   

  
	
  ARTICLE 9 AMENDMENTS

  
	
   

  
	
  Section 9.01. Without Consent of
  Holders

  
	
  Section 9.02. With Consent of Holders

  
	
  Section 9.03. Compliance with Trust
  Indenture Act

  
	
  Section 9.04. Revocation and Effect of
  Consents

  

 

iii

 

	
  Section 9.05. Notation on or Exchange
  of Securities

  
	
  Section 9.06. Trustee to Sign
  Supplemental Indentures

  
	
  Section 9.07. Effect of Supplemental
  Indentures

  
	
   

  
	
  ARTICLE 10 CONVERSION OF THE SECURITIES

  
	
   

  
	
  Section 10.01. Conversion Privilege

  
	
  Section 10.02. Conversion Procedure

  
	
  Section 10.03. Adjustments Below Par
  Value

  
	
  Section 10.04. Taxes on Conversion

  
	
  Section 10.05. Company to Provide
  Stock

  
	
  Section 10.06. Adjustment of
  Conversion Price

  
	
  Section 10.07. No Adjustment

  
	
  Section 10.08. Equivalent Adjustments

  
	
  Section 10.09. Adjustment for Tax
  Purposes

  
	
  Section 10.10. Notice of Adjustment

  
	
  Section 10.11. Notice of Certain
  Transactions

  
	
  Section 10.12. Effect of
  Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion
  Privilege

  
	
  Section 10.13. Trustee’s Disclaimer

  
	
  Section 10.14. Voluntary Reduction

  
	
  Section 10.15. Simultaneous
  Adjustments

  
	
   

  
	
  ARTICLE 11 SUBORDINATION

  
	
   

  
	
  Section 11.01. Securities Subordinated
  to Senior Indebtedness

  
	
  Section 11.02. Payments to Holders

  
	
  Section 11.03. Subrogation of
  Securities

  
	
  Section 11.04. Authorization to Effect
  Subordination

  
	
  Section 11.05. Notice to Trustee

  
	
  Section 11.06. Trustee’s Relation to
  Senior Indebtedness

  
	
  Section 11.07. No Impairment of
  Subordination

  
	
  Section 11.08. Certain Conversions
  Deemed Payment

  
	
  Section 11.09. Article Applicable
  to Paying Agents

  
	
  Section 11.10. Senior Indebtedness
  Entitled to Rely

  
	
   

  
	
  ARTICLE 12 MISCELLANEOUS

  
	
   

  
	
  Section 12.01. Trust Indenture Act
  Controls

  
	
  Section 12.02. Notices

  
	
  Section 12.03. Communication by
  Holders with Other Holders

  
	
  Section 12.04. Certificate and Opinion
  as to Conditions Precedent

  
	
  Section 12.05. Statements Required in
  Certificate or Opinion

  
	
  Section 12.06. Separability Clause

  
	
  Section 12.07. Rules by Trustee,
  Paying Agent, Conversion Agent and Registrar

  
	
  Section 12.08. Legal Holidays

  
	
  Section 12.09. Governing Law

  
	
  Section 12.10. No Recourse Against
  Others

  
	
  Section 12.11. Successors

  

 

iv

 

	
  Section 12.12. Multiple Originals

  

 

	
  Exhibit
  A-1

  	
  -

  	
  Form
  of Global Security

  
	
  Exhibit
  A-2

  	
  -

  	
  Form
  of Certificated Security

  
	
  Exhibit
  B

  	
  -

  	
  Transfer
  Certificate

  

 

v

 

INDENTURE dated as of July 18, 2003 between Griffon Corporation, a
Delaware corporation (the “Company”), and American Stock Transfer &
Trust Company, a trust company organized under the laws of the State of New
York (the “Trustee”).

 

Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders (as defined below) of the
Company’s 4.0% Contingent Convertible Subordinated Notes Due 2023 (the “Securities”):

 

ARTICLE
1

 

DEFINITIONS AND INCORPORATION BY REFERENCE

 

Section 1.01.  Definitions.

 

“144A
Global Security” means a permanent Global Security in the form of the
Security attached hereto as Exhibit A-1 that is deposited with and registered
in the name of the Depositary, representing Securities sold in reliance on Rule
144A under the Securities Act.

 

“Affiliate” has the meaning provided in Rule 405 under the
Securities Act.

 

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

 

“Beneficial Owner” shall be determined in accordance with Rule
13d-3 and Rule 13d-5 promulgated by the SEC under the Exchange Act or any
successor provision, except that, for purposes of the definition of Change in
Control, a Person shall be deemed to have “Beneficial Ownership” of all shares
of Common Stock that the Person has the right to acquire, whether exercisable
immediately or only after the passage of time.

 

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

 

“Board Resolution” means a copy of one or more resolutions,
certified by an Officer of the Company to have been duly adopted or consented
to by the applicable Board of Directors and to be in full force and effect, and
delivered to the Trustee.

 

“Business Day” means a day that in the City of New York is not a
day on which banking institutions are authorized or obligated by law or
regulation to close.

 

“Capitalized Lease Obligations” means, as to any Person, the
obligations of such Person under a lease that is required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.

 

1

 

“Capital Stock” for any corporation means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that
corporation.

 

“Cash Conversion Price” means, in respect of each $1,000 of
principal amount of a Security, an amount in cash equal to the product of (i)
the average of the Closing Price of the Common Stock for each Trading Day in
the five Trading Day period immediately following (a) the date on which the
Company delivers timely notice of its election to deliver cash instead of
issuing shares of Common Stock in accordance with Section 10.02, if the
Company has not given notice of redemption with respect to such Security or (b)
the Conversion Date, if the Company has given notice of redemption with respect
to such Security, in either case multiplied by (ii) the number of shares of
Common Stock issuable upon conversion of such Security on such date and
appropriately adjusted to take into account the occurrence, during such five
Trading Day period, of any event requiring adjustment of the Conversion Price
under this Indenture.

 

“Cash Equivalents” means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor’s, a division of the
McGraw-Hill Companies, Inc. (“S&P”) or Moody’s Investors Service,
Inc. (“Moody’s”); (iii) commercial paper maturing no more than one year
from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any
bank meeting the qualifications specified in clause (iii) above; and (v) money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (iv) above.

 

“Certificated Securities” means Securities that are in the form
of the Securities attached hereto as Exhibit A-2.

 

“Change
in Control” shall be deemed to have occurred at such time after the
original issuance of the Securities as:

 

(a)           any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company, to any Person (including
any syndicate or group deemed to be a “person” under Section 13(d)(3) of
the Exchange Act);

 

2

 

(b)           the approval by the holders of the
Capital Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company, whether or not otherwise in compliance with this
Indenture;

 

(c)           any Person
(including any syndicate or group deemed to be a “person” under
Section 13(d)(3) of the Exchange Act), other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, is or becomes the Beneficial Owner, directly or indirectly, through
a purchase or other acquisition transaction or series of transactions (other
than a merger or consolidation involving the Company), of shares of Capital
Stock of the Company entitling such Person to exercise in excess of 30% of the
aggregate ordinary voting power of all shares of Voting Stock of the Company;
or

 

(d)           the first day on
which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.

 

“Closing Price” with respect to any security on any day means
the closing sale price per security regular way on such day or, in case no such
sale is reported for such day, the average of the reported closing bid and
asked prices, regular way, in each case on the New York Stock Exchange, or, if
such security is not listed or admitted to trading on such Exchange, on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system,
the average of the closing bid and asked prices of such security on the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or if not so available, the price furnished by any New York Stock
Exchange member firm selected from time to time by the Board of Directors for
that purpose, or a price determined in good faith by the Board of Directors or,
to the extent permitted by applicable law, a duly authorized committee thereof,
whose determination shall be conclusive.

 

“Common Stock” shall mean shares of the Company’s Common Stock,
$.25 par value per share, as they exist on the date of this Indenture or any
other shares of Capital Stock of the Company into which the Common Stock shall
be reclassified or changed.

 

“Company” means the party named as the “Company” in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor.  The foregoing sentence shall
likewise apply to any subsequent successor or successors.

 

“Company Order” means a written request or order signed in the
name of the Company by any two Officers.

 

“Contingent Interest” shall mean an amount of interest payable
at a rate equal to 0.50% per annum using a principal amount equal to the
average of the Security Trading Price for the five Trading Days ending on the
third Trading Day immediately preceding the first day for the applicable
Contingent Interest Period (the “Contingent Interest Average Trading Price”)
per $1,000 of Securities in respect of any Contingent Interest Period, if the
Contingent Interest Average Trading Price equals $1,200 or more.

 

3

 

“Contingent Interest Period” shall mean any six-month interest
period from July 18 to, but excluding, January 18, and from
January 18 to, but excluding, July 18, with the initial six-month
period commencing on July 18, 2010.

 

“Continuing Directors” means, as of any date of determination,
any member of the Board of Directors who (a) was a member of the Board of
Directors as of the date hereof or (b) was nominated for election or elected to
the Board of Directors with approval of a majority of the Continuing Directors
who were members at the time of the new director’s nomination or election.

 

“Corporate Trust Office” means the office of the Trustee at
which at any time the trust created by this Indenture shall be administered,
which office at the date hereof is located at 59 Maiden Lane, New York, New
York 10038, Attention: Corporate Trust Department, or such other address as the
Trustee may designate from time to time by notice to the Holders and the
Company, or the principal corporate trust office of any successor Trustee (or
such other address as a successor Trustee may designate from time to time by
notice to the Holders and the Company).

 

“Credit Agreement” means the Loan Agreement, dated as of
October 25, 2001, among the Company, Telephonics Corporation, the lenders
party thereto and Fleet National Bank, as Administrative Agent and The Chase
Manhattan Bank, as Documentation Agent, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreement may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder or adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.

 

“Default” means any event which is, or after notice or passage
of time or both would be, an Event of Default.

 

“Designated Senior Indebtedness” means (i) Indebtedness
under or in respect of the Credit Agreement and (ii) any particular Senior
Indebtedness of the Company in which the instrument creating or evidencing the
same or the assumption or guarantee thereof (or any related agreements or
documents to which the Company is a party) expressly provides that such Senior
Indebtedness shall be “Designated Senior Indebtedness” for purposes of this
Indenture (provided  that such instrument, agreement or other
document may place limitations and conditions on the right of such Senior
Indebtedness to exercise the rights of Designated Senior Indebtedness).

 

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

 

“GAAP” means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards

 

4

 

Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect from time
to time.

 

“Global Securities” means Securities that are in the form of the
Securities attached hereto as Exhibit A-1, and, to the extent that such
Securities are required to bear the legend required by Section 2.06, such
Securities will be in the form of a 144A Global Security.

 

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

 

“Indebtedness” means, with respect to any Person, without
duplication, (a) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person (i) for borrowed money (including
obligations of such Person in respect of overdrafts, and any loans or advances
from banks, whether or not evidenced by notes or similar instruments) or (ii)
evidenced by credit or loan agreements, bonds, debentures, notes or similar
instruments (whether or not the recourse of the lender is to the whole of the
assets of such Person or to only a portion thereof) (other than any accounts payable
or other accrued current liability or obligation incurred in the ordinary
course of business in connection with the obtaining of materials or services),
(b) all reimbursement obligations and other liabilities (contingent or
otherwise) of such Person with respect to letters of credit, bank guarantees or
bankers’ acceptances, (c) all obligations and liabilities (contingent or
otherwise) of such Person (i) in respect of Capitalized Lease Obligations or
(ii) under any lease or related document (including a purchase agreement,
conditional sale or other title retention agreement) in connection with the
lease of real property or improvements thereon (or any personal property
included as part of any such lease) which provides that such Person is
contractually obligated to purchase or cause a third party to purchase the
leased property or pay an agreed-upon residual value of the leased property to
the lessor (whether or not such lease transaction is characterized as an
operating lease or a Capitalized Lease Obligation), (d) all obligations
(contingent or otherwise) of such Person with respect to any interest rate or
other swap, cap, floor or collar agreement, hedge agreement, forward contract,
or other similar instrument or agreement or foreign currency hedge, exchange,
purchase or similar instrument or agreement, (e) all direct or indirect
guaranties or similar agreements by such Person in respect of, and obligations
or liabilities of such Person to purchase or otherwise acquire or otherwise
assure a creditor against loss in respect of, indebtedness, obligations or
liabilities of another Person of the kinds described in clauses (a) through
(d), and (f) any and all deferrals, renewals, extensions, refinancings and
refundings of, or amendments, modifications or supplements to, any
indebtedness, obligation or liability of the kinds described in clauses (a)
through (e); provided, however, that Indebtedness shall not
include obligations and liabilities of such Person (x) arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds in the ordinary
course of business, provided such obligations are extinguished within two
Business Days of their incurrence, (y) resulting from the endorsement of
negotiable instruments for collection in the ordinary course of business and
consistent with past business practices or (z) stand-by letters of credit to
the extent collaterallized by cash or Cash Equivalents.

 

5

 

“Indenture” means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof, including the provisions
of the TIA that are deemed to be a part hereof.

 

“Initial Purchasers” shall mean Deutsche Bank Securities Inc.,
J.P. Morgan Securities Inc., Jefferies & Company, Inc. and Legg Mason Wood
Walker Incorporated.

 

“Issue Date” of any Security means the date on which the
Security was originally issued or deemed issued as set forth on the face of the
Security.

 

“Liquidated Damages” has the meaning set forth in the
Registration Rights Agreement dated as of July 18, 2003 between the
Company and the Initial Purchasers.

 

“Market Price” means the average of the Closing Prices per share
of Common Stock for 20 consecutive Trading Days commencing 30 Trading Days
before the record date with respect to any distribution, issuance or other
event requiring such computation, appropriately adjusted (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
conclusive) to take into account the occurrence, during the period commencing
on the first of such 20 consecutive Trading Days and ending on such record
date, of any event requiring adjustment of the Conversion Price under this Indenture.

 

“Non-Recourse Indebtedness” means any Indebtedness of the
Company or any of its Subsidiaries that is (i) (A) specifically advanced
to finance the acquisition of investment assets and (B) secured only by
the assets to which such Indebtedness relates without recourse to the Company
or any of its Subsidiaries, (ii) advanced to a Subsidiary of the Company
or group of Subsidiaries of the Company formed for the sole purpose of
acquiring or holding investment assets (A) against which a loan is
obtained that is made without recourse to, and with no cross-collateralization
against the assets of, the Company or any other Subsidiary of the Company, and
(B) upon complete or partial liquidation of which the loan must be
correspondingly completely or partially repaid, as the case may be, or
(iii) specifically advanced to finance the acquisition of real property
and secured by only the real property to which such Indebtedness relates
without recourse to the Company or any of its Subsidiaries.

 

“Obligations” means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation under which any Indebtedness is
created, evidenced or secured, including in the case of the Securities,
Contingent Interest and Liquidated Damages, if any.

 

“Officer” means the Chairman and Chief Executive Officer, the
President, any Vice President (whether or not such is preceded by any modifier
such as “Executive, “Senior” or the like), the Chief Financial Officer, the
Treasurer, the Controller or the Secretary of such Person or any other officer
designated by the board of directors of such Person serving in a similar
capacity; provided, that the designation of any such Officer by the Board of Directors
of the Company shall be evidenced in a Board Resolution.

 

“Officers’ Certificate” means a written certificate containing
the information specified in Sections 12.04 and 12.05, signed in the name of
the Company by any two Officers,

 

6

 

and delivered to the
Trustee.  An Officers’ Certificate given
pursuant to Section 4.03 shall be signed by the principal executive
officer, principal financial officer or the principal accounting officer of the
Company but need not contain the information specified in Sections 12.04 and
12.05.

 

“Opinion of Counsel” means a written opinion containing the
information specified in Section 12.04 and 12.05, from legal counsel who
is acceptable to the Trustee in its reasonable discretion.  The counsel may be an employee of, or
counsel to, the Company or the Trustee.

 

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

 

“Recourse Indebtedness” means all Indebtedness of the Company
and its Subsidiaries other than Non-Recourse Indebtedness.

 

“Redemption Date” or “Redemption Dates” shall mean the
date specified for redemption of the Securities in accordance with the terms of
the Securities and this Indenture.

 

“Redemption Price” or “Redemption Prices” shall have the
meaning set forth in paragraph 5 of the Securities.

 

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

 

“Representative” means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Indebtedness; provided, however, that if, and for so
long as, any Designated Senior Indebtedness lacks such a representative, then
the Representative for such Designated Senior Indebtedness shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Indebtedness in respect of any Designated Senior
Indebtedness.

 

“Restricted Security” means a Security required to bear the
restrictive legend set forth in the form of Security set forth in Exhibits A-1
and A-2 of this Indenture.

 

“Rule 144A” means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.

 

“SEC” means the Securities and Exchange Commission.

 

7

 

“Security” or “Securities” means any of the Company’s
4.0% Contingent Convertible Subordinated Notes Due 2023, as amended or
supplemented from time to time, issued under this Indenture.

 

“Security Trading Price” per $1,000 in principal amount of
Securities on any date of determination means the average of the secondary
market bid quotations per $1,000 in principal amount of Securities obtained by
the Conversion Agent for $5,000,000 in principal amount of Securities at
approximately 3:30 p.m., New York City time, on such determination date from
three independent nationally recognized securities dealers selected by the
Company; provided
that if at least three such bids cannot reasonably be obtained by the
Conversion Agent, but two such bids are obtained, then the average of the two
bids shall be used, and if only one such bid can reasonably be obtained by the
Conversion Agent, such one bid shall be used. 
If the Conversion Agent cannot reasonably obtain at least one bid for
$5,000,000 in principal amount of Securities from a nationally recognized
securities dealer or, in the reasonable judgment of the Company, the bid
quotations are not indicative of the secondary market value of the Securities,
then the Security Trading Price will be determined in good faith by the
calculation agent (which shall initially be the Trustee unless the Trustee
shall have appointed a calculation agent, which may be any investment bank with
a national or international reputation with experience in such matters,
including the Initial Purchasers or their successors) taking into account in
such determination such factors as it, in its sole discretion after
consultation with the Company, deems appropriate.

 

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

 

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

 

“Senior Indebtedness” means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowed as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness of the Company, whether secured or
unsecured, absolute or contingent, due or to become due, outstanding on the
date of this Indenture or thereafter created, incurred, assumed, guaranteed or
in effect guaranteed by the Company (including all deferrals, renewals,
extensions or refundings of, or amendments, modifications or supplements to,
the foregoing).  Senior indebtedness
does not include (i) any indebtedness or obligation whose terms expressly
provide that such indebtedness or obligation shall not be senior in right of
payment to the Securities or expressly provides that such indebtedness is equal
or pari passu in right of payment with or junior in right of payment to the
Securities; (ii) any indebtedness of the Company to any Subsidiary of the
Company and (iii) the Securities.

 

“Significant Subsidiary” has the meaning ascribed to such term
in Regulation S-X (17 CFR Part 210).

 

8

 

“Stated Maturity”, when used with respect to any Security, means
the date specified in such Security as the fixed date on which an amount equal
to the principal amount of such Security is due and payable.

 

“Subsidiary” means, with respect to any Person, (i) any
corporation of which the outstanding Capital Stock having at least a majority
of the votes entitled to be cast in the election of directors under ordinary
circumstances (determined without regard to any classification of directors)
shall at the time be owned, directly or indirectly, by such Person,
(ii) any other Person (other than a partnership) of which at least a
majority of the voting interest under ordinary circumstances is at the time,
directly or indirectly, owned by such Person or (iii) any partnership (a) the
sole general partner or the managing general partner of which is such Person or
a Subsidiary of such Person or (b) the only general partners of which are
such Person or one or more Subsidiaries of such Person (or any combination
thereof).

 

“TIA” means the Trust Indenture Act of 1939 as in effect on the
date of this Indenture, provided, however, that in the event the TIA is amended
after such date, TIA means, to the extent required by any such amendment, the
TIA as so amended.

 

“Trading Day” means (x) if the applicable security is listed or
admitted for trading on the New York Stock Exchange, or another national
security exchange, a day on which the New York Stock Exchange or such other
national security exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may be
made thereon or (z) if the applicable security is not so listed, admitted for
trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law or executive order to close.

 

“Trustee” means the party named as the “Trustee” in the
first paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor.  The foregoing sentence shall
likewise apply to any subsequent such successor or successors.

 

“U.S. Government Obligations” means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of
which the full faith and credit of the United States of America is pledged.

 

“Voting Stock” of a Person means Capital Stock of such Person of
the class or classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances (determined without regard to any
classification of directors) to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time Capital Stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).

 

9

 

Section 1.02.  Other Definitions.

 

	
  Term

  	
   

  	
  Defined in

  Section:

  
	
   

  	
   

  	
   

  
	
  Acceleration Notice

  	
   

  	
  6.02(a)

  
	
  Act

  	
   

  	
  1.05(a)

  
	
  Agent Members

  	
   

  	
  2.12(e)(v)

  
	
  Change in Control Purchase Date

  	
   

  	
  3.09(a)

  
	
  Change in Control Purchase Price

  	
   

  	
  3.09(a)

  
	
  Company Change in Control Notice

  	
   

  	
  3.09(b)

  
	
  Company Notice

  	
   

  	
  3.08(b)

  
	
  Company Notice Date

  	
   

  	
  3.08(b)

  
	
  Conversion Agent

  	
   

  	
  2.03

  
	
  Conversion Date

  	
   

  	
  10.02

  
	
  Conversion Price

  	
   

  	
  10.06

  
	
  Depositary

  	
   

  	
  2.01(b)

  
	
  DTC

  	
   

  	
  2.01(b)

  
	
  Event of Default

  	
   

  	
  6.01

  
	
  Ex-Dividend Date

  	
   

  	
  10.01

  
	
  Expiration Time

  	
   

  	
  10.06(d)

  
	
  Legal Holiday

  	
   

  	
  12.08

  
	
  Legend

  	
   

  	
  2.06(f)

  
	
  Paying Agent

  	
   

  	
  2.03

  
	
  Payment Blockage Period

  	
   

  	
  11.02(a)

  
	
  Purchase Date

  	
   

  	
  3.08(a)

  
	
  Purchase Notice

  	
   

  	
  3.08(a)(i)

  
	
  Purchase Price

  	
   

  	
  3.08(a)

  
	
  Purchased Shares

  	
   

  	
  10.06(d)

  
	
  QIB

  	
   

  	
  2.01(b)

  
	
  Quarter

  	
   

  	
  10.01(a)

  
	
  Registrar

  	
   

  	
  2.03

  
	
  Rule 144A Information

  	
   

  	
  4.06

  

 

Section 1.03.  Incorporation by Reference of Trust
Indenture Act. Whenever this Indenture refers to a provision of the TIA,
the provision is incorporated by reference in and made a part of this
Indenture.  The following TIA terms used
in this Indenture have the following meanings:

 

“Commission” means the SEC.

 

“Indenture Securities” means the Securities.

 

“Indenture Security Holder” means a Securityholder.

 

“Indenture to be Qualified” means this Indenture.

 

10

 

“Indenture Trustee” or “Institutional Trustee” means the
Trustee.

 

“Obligor” on the indenture securities means the Company.

 

All other TIA terms used in this Indenture that are defined by the TIA,
defined by a TIA reference to another statute or defined by an SEC rule have
the meanings assigned to them by such definitions.

 

Section 1.04.  Rules of Construction.  Unless the context otherwise requires:

 

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

 

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

 

(c)           “or” is not exclusive;

 

(d)           “including” means including, without
limitation; and

 

(e)           words in the singular include the
plural, and words in the plural include the singular.

 

Section 1.05.  Acts of Holders.

 

(a)           Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company.  Such
instrument or instruments (and the action embodied therein and evidenced thereby)
are herein sometimes referred to as the “Act” of Holders signing such
instrument or instruments.  Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and conclusive in favor
of the Trustee and the Company, if made in the manner provided in this Section.

 

(b)           The fact and date of the execution by
any Person of any such instrument or writing may be proved by the affidavit of
a witness of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to such officer the
execution thereof.  Where such execution
is by a signer acting in a capacity other than such signer’s individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of such signer’s authority.

 

The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.

 

11

 

(c)           The ownership of Securities shall be
proved by the register maintained by the Registrar.

 

(d)           Any request, demand, authorization,
direction, notice, consent, waiver or other Act of the Holder of any Security
shall bind every future Holder of the same Security and the holder of every
Security issued upon the registration of transfer thereof or in exchange therefor
or in lieu thereof in respect of anything done, omitted or suffered to be done
by the Trustee or the Company in reliance thereon, whether or not notation of
such action is made upon such Security.

 

(e)           If the Company shall solicit from the
Holders any request, demand, authorization, direction, notice, consent, waiver
or other Act, the Company may, at its option, by or pursuant to a Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, 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 Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose the outstanding Securities shall be computed as
of such record date; provided that no such authorization, agreement or consent
by the Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than
six months after the record date.

 

ARTICLE
2

THE SECURITIES

 

Section 2.01.  Form and Dating. 
(a)  Forms. The Securities
and the Trustee’s certificate of authentication shall be substantially in the
forms set forth on Exhibits A-1 and A-2, which are a part of this Indenture and
incorporated by reference herein.  The Securities
may have notations, legends or endorsements required by law, stock exchange
rule or usage; provided that any such notation, legend or endorsement required
by usage is in a form acceptable to the Company.  The Company shall provide any such notations, legends or
endorsements to the Trustee in writing. 
Each Security shall be dated the date of its authentication.

 

(b)           144A Global
Securities.  Securities offered and
sold to qualified institutional buyers as defined in Rule 144A (“QIBs”)
in reliance on Rule 144A shall be issued, initially only in the form of a
Global Security, which shall be deposited with the Trustee at its Corporate
Trust Office, as custodian for the Depositary and registered in the name of The
Depository Trust Company (“DTC”) or the nominee thereof (such
depositary, or any successor thereto, and any such nominee being hereinafter
referred to as the “Depositary”), duly executed by the Company and
authenticated by the Trustee as hereinafter provided.  The aggregate principal amount of the 144A Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Trustee and the Depositary as hereinafter provided.

 

12

 

(c)           Global Securities
in General.  Each Global Security
shall represent such of the outstanding Securities as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon and that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges, redemptions
and conversions.

 

Any adjustment of the aggregate principal amount of a Global Security
to reflect the amount of any increase or decrease in the amount of outstanding
Securities represented thereby shall be made by the Trustee as required by
Section 2.12 hereof and shall be made on the records of the Trustee and
the Depositary.

 

(d)           Book-Entry
Provisions.  The Company shall
execute and the Trustee shall, in accordance with this Section 2.01(d),
authenticate and deliver initially one or more Global Securities that (a) shall
be registered in the name of the Depositary, (b) shall be delivered by the
Trustee to the Depositary or pursuant to the Depositary’s instructions and (c)
shall bear legends substantially to the following effect:

 

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

 

(e)           Certificated
Securities.  Securities not issued
as interests in the Global Securities will be issued in certificated form
substantially in the form of Exhibit A-2 attached hereto.

 

13

 

Section 2.02.  Execution and Authentication.  The Securities shall be executed on behalf
of the Company by the manual or facsimile signature of any Officer.

 

Securities bearing the manual or facsimile signatures of individuals
who were at the time of the execution of the Securities the proper Officers of
the Company shall bind the Company, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of
authentication of such Securities.

 

No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder.

 

The Trustee shall authenticate and deliver Securities for original
issue in an aggregate principal amount of up to $150,000,000 (which shall
include the Initial Purchasers’ option to purchase additional Securities in an
aggregate principal amount of up to $25,000,000) upon a Company Order without
any further action by the Company.  The
aggregate principal amount of Securities outstanding at any time may not exceed
the amount set forth in the foregoing sentence, except as provided in
Section 2.07.

 

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

 

Section 2.03.  Registrar, Paying Agent and Conversion Agent.  The Company shall maintain an office or
agency where Securities may be presented for registration of transfer or for
exchange (“Registrar”), an office or agency where Securities may be
presented for purchase or payment (“Paying Agent”) and an office or
agency where Securities may be presented for conversion (“Conversion Agent”).  The Registrar shall keep a register of the
Securities and of their transfer and exchange. 
The Company may have one or more co-registrars, one or more additional
paying agents and one or more additional conversion agents.  The term Paying Agent includes any
additional paying agent, including any named pursuant to Section 4.05.  The term Conversion Agent includes any additional
conversion agent, including any named pursuant to Section 4.05.

 

The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar (other than the
Trustee).  Such agreement shall implement
the provisions of this Indenture that relate to such agent.  The Company shall notify the Trustee of the
name and address of any such agent.  If
the Company fails to maintain a Registrar, Paying Agent or Conversion Agent,
the Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 7.07. 
The Company or any Subsidiary or an Affiliate of either of them may act
as Paying Agent, Registrar, Conversion Agent or co-registrar.

 

The Company initially appoints the Trustee as Registrar, Conversion
Agent and Paying Agent in connection with the Securities.

 

14

 

Section 2.04.  Paying Agent to Hold Money in Trust.  Except as otherwise provided herein, not
later 11:00 a.m. (New York City time) on the Business Day prior to each due
date of payments in respect of any Security, the Company shall deposit with the
Paying Agent a sum of money sufficient to make such payments when so becoming
due.  The Company shall require each Paying
Agent (other than the Trustee) to agree in writing that the Paying Agent shall
hold in trust for the benefit of Holders or the Trustee all money held by the
Paying Agent for the making of payments in respect of the Securities and shall
notify the Trustee of any Default by the Company in making any such
payment.  At any time during the
continuance of any such Default, the Paying Agent shall, upon the written
request of the Trustee, forthwith pay to the Trustee all moneys held in
trust.  If the Company, a Subsidiary or
an Affiliate of either of them acts as Paying Agent, it shall segregate the
money held by it as Paying Agent and hold it as a separate trust fund.  The Company at any time may require the
Paying Agent to pay all money held by it to the Trustee and to account for any
funds disbursed by it.  Upon doing so,
the Paying Agent shall have no further liability for such money or shares of
Common Stock, as the case may be.

 

Section 2.05.  Holder Lists. 
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders.  If the Trustee is not the
Registrar, the Company shall cause to be furnished to the Trustee at least
semiannually on January 10 and July 10 and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders, which
list may be dated not more than 15 days prior to the time such information is furnished;
provided however, that the list of Holders provided on January 10 and
July 10 shall contain the list of Holders as of the immediately preceding
January 1 and July 1, respectively.

 

Section 2.06.  Transfer and Exchange.

 

(a)           Subject to Section 2.12 hereof,
upon surrender for registration of transfer of any Securities, together with a
written instrument of transfer satisfactory to the Registrar duly executed by
the Securityholder or such Securityholder’s attorney duly authorized in
writing, at the office or agency of the Company designated as Registrar or
co-registrar pursuant to Section 2.03, the Company shall execute and the
Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of any authorized
denomination or denominations, of a like aggregate principal amount.  The Company shall not charge a service
charge for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges that may be imposed in connection with the transfer or
exchange of the Securities from the Securityholder requesting such transfer or
exchange.

 

At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged, together
with a written instrument of transfer satisfactory to the Registrar duly
executed by the Securityholder or such Securityholder’s attorney duly
authorized in writing, at such office or agency.  Whenever any Securities are so

 

15

 

surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities that the Holder making the exchange is entitled to receive.

 

The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of Securities selected for redemption (except,
in the case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any Securities in respect of which a Purchase Notice or Change in
Control Purchase Notice has been given and not withdrawn by the Holder thereof
in accordance with the terms of this Indenture (except, in the case of
Securities to be purchased in part, the portion thereof not to be purchased) or
any Securities for a period of 15 days before the mailing of a notice of
redemption of Securities to be redeemed.

 

(b)           Notwithstanding any provision to the
contrary herein, so long as a Global Security remains outstanding and is held
by or on behalf of the Depositary, transfers of a Global Security, in whole or
in part, shall be made only in accordance with Section 2.12 and this Section 2.06(b).  Transfers of a Global Security shall be
limited to transfers of such Global Security in whole, or in part, to nominees
of the Depositary or to a successor of the Depositary or such successor’s
nominee.

 

(c)           Successive registrations and
registrations of transfers and exchanges as aforesaid may be made from time to
time as desired, and each such registration shall be noted on the register for
the Securities.

 

(d)           Any Registrar appointed pursuant to
Section 2.03 hereof shall provide to the Trustee such information as the
Trustee may reasonably require in connection with the delivery by such
Registrar of Securities upon transfer or exchange of Securities.

 

(e)           No Registrar shall be required to
make registrations of transfer or exchange of Securities during any periods
designated in the text of the Securities or in this Indenture as periods during
which such registration of transfers and exchanges need not be made.

 

(f)            If Securities are issued upon the
transfer, exchange or replacement of Securities subject to restrictions on
transfer and bearing the legends set forth on the forms of Securities attached
hereto as Exhibits A-1 and A-2 setting forth such restrictions (collectively,
the “Legend”), or if a request is made to remove the Legend on a
Security, the Securities so issued shall bear the Legend, or the Legend shall
not be removed, as the case may be, unless there is delivered to the Company
and the Registrar such satisfactory evidence, which shall include an Opinion of
Counsel, as may be reasonably required by the Company and the Registrar, that
neither the Legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of Rule
144A or Rule 144 under the Securities Act or that such Securities are not
“restricted” within the meaning of Rule 144 under the Securities Act.  Upon (i) provision of such satisfactory
evidence, or (ii) notification by the Company to the Trustee and registrar of
the sale of such Security pursuant to a registration statement that is
effective at the time of such sale, the Trustee, at the written direction of
the Company, shall authenticate and deliver a Security that does not bear the
Legend.  If the Legend is removed from
the face of a Security and the Security is subsequently held by an Affiliate of
the Company, the Legend shall be reinstated.

 

16

 

Section 2.07.  Replacement Securities.  If any mutilated Security is surrendered to
the Trustee, or the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Security has been acquired by a
protected purchaser (within the meaning of Section 8-303 of the Uniform
Commercial Code), the Company shall execute, and upon the Company’s written
request the Trustee shall authenticate and deliver, in exchange for any such
mutilated Security or in lieu of any such destroyed, lost or stolen Security, a
new Security of like tenor and principal amount, bearing a number not
contemporaneously outstanding.

 

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

 

Upon the issuance of any new Securities under this Section, 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 (including the fees and expenses of the Trustee) connected therewith.

 

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

 

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

 

Section 2.08.  Outstanding Securities; Determinations
of Holders’ Action.  Securities
outstanding at any time are all the Securities authenticated by the Trustee,
except for those cancelled by it, those paid pursuant to Section 2.07,
those delivered to it for cancellation pursuant to Section 2.10 and those
described in this Section 2.08 as not outstanding.  A Security does not cease to be outstanding
because the Company or an Affiliate thereof holds the Security; provided,
however, that in determining whether the Holders of the requisite principal
amount of Securities have given or concurred in any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded.  Subject to the foregoing, only Securities
outstanding at the time of such determination shall be considered in any such
determination (including, without limitation, determinations pursuant to
Articles 6 and 9).

 

17

 

If a Security is replaced pursuant to Section 2.07, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a protected purchaser.

 

If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, or on the Business Day following a Purchase Date or a Change
in Control Purchase Date, or on Stated Maturity, money sufficient to pay
amounts owed with respect to Securities payable on that date, then immediately
after such Redemption Date, Purchase Date, Change in Control Purchase Date or
Stated Maturity, as the case may be, such Securities shall cease to be
outstanding and interest (including Contingent Interest and Liquidated Damages,
if any), on such Securities shall cease to accrue; provided that if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee
has been made.

 

If a Security is converted in accordance with Article 10, then
from and after the time of conversion on the Conversion Date, such Security
shall cease to be outstanding and interest (including Contingent Interest, if
any), shall cease to accrue on such Security.

 

Section 2.09.  Temporary Securities.  Pending the preparation of definitive
Securities, the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the Officers executing such Securities
may determine, as conclusively evidenced by their execution of such Securities.

 

If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay.  After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of
the temporary Securities at the office or agency of the Company designated for
such purpose pursuant to Section 2.03, without charge to the Holder.  Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations.  Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.

 

Section 2.10.  Cancellation. 
All Securities surrendered for payment, purchase by the Company pursuant
to Article 3, conversion, redemption or registration of transfer or
exchange (other than Securities converted pursuant to Section 10.02)
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly cancelled by it. 
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder that the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. 
The Company may not issue new Securities to replace Securities it has
paid or delivered to the Trustee for cancellation or that any Holder has
converted pursuant to Article 10. 
No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this

 

18

 

Section, except as expressly
permitted by this Indenture.  All
cancelled Securities held by the Trustee shall be disposed of by the Trustee in
accordance with the Trustee’s customary procedure.

 

Section 2.11.  Persons Deemed Owners.  Prior to due presentment of a Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Security is registered
as the owner of such Security for the purpose of receiving payment of the
principal amount of the Security or the payment of any Redemption Price,
Purchase Price or Change in Control Purchase Price in respect thereof, and
accrued but unpaid interest (including Contingent Interest and Liquidated
Damages, if any) thereon, for the purpose of conversion and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

 

Section 2.12.  Global Securities.

 

(a)           A Global Security may not be
transferred, in whole or in part, to any Person other than the Depositary or a
nominee or any successor thereof, and no such transfer to any such other Person
may be registered; provided that the foregoing shall not prohibit any transfer
of a Security that is issued in exchange for a Global Security but is not
itself a Global Security.  No transfer
of a Security to any Person shall be effective under this Indenture or the
Securities unless and until such Security has been registered in the name of
such Person.  Notwithstanding any other
provisions of this Indenture or the Securities, transfers of a Global Security,
in whole or in part, shall be made only in accordance with Section 2.06
and this Section 2.12.

 

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

 

(c)           The restrictions imposed by the
Legend upon the transferability of any Security shall cease and terminate when
such Security has been sold pursuant to an effective registration statement
under the Securities Act or transferred in compliance with Rule 144 under the
Securities Act (or any successor provision thereto) or, if earlier, upon the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision).  Any Security as to which such restrictions
on transfer shall have expired in accordance with their terms or shall have
terminated may, upon a surrender of such Security for exchange to the Registrar
in accordance with the provisions of this Section 2.12 (accompanied, in
the event that such restrictions on transfer have terminated by reason of a
transfer in compliance with Rule 144 or any successor provision, by an Opinion
of Counsel having

 

19

 

substantial experience in
practice under the Securities Act and otherwise reasonably acceptable to the
Company and the Registrar, addressed to the Company and in form acceptable to
the Company, to the effect that the transfer of such Security has been made in
compliance with Rule 144 or such successor provision), be exchanged for a new
Security, of like tenor and aggregate principal amount, which shall not bear
the restrictive Legend.  The Company
shall inform the Trustee of the effective date of any registration statement
registering the Securities under the Securities Act.  The Trustee shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the aforementioned Opinion
of Counsel or registration statement.

 

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

 

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

 

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

 

(ii)           Securities issued
in exchange for a Global Security or any portion thereof shall be issued in
definitive, fully registered form, without interest coupons, shall have an
aggregate principal amount equal to that of such Global Security or portion
thereof to be so exchanged, shall be registered in such names and be in such
authorized denominations as the Depositary shall designate and shall bear the
applicable legends provided for herein. 
Any Global Security to be exchanged in whole shall be surrendered by the
Depositary to the Trustee, as Registrar. 
With regard to any Global Security to be exchanged in part, either such
Global Security shall be so surrendered for exchange or, if the Trustee is
acting as

 

20

 

custodian for
the Depositary or its nominee with respect to such Global Security, the
principal amount thereof shall be reduced, by an amount equal to the portion
thereof to be so exchanged, by means of an appropriate adjustment made on the
records of the Trustee.  Upon any such
surrender or adjustment, the Trustee shall authenticate and deliver the
Security issuable on such exchange to or upon the order of the Depositary or an
authorized representative thereof.

 

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

 

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

 

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

 

(vi)          With respect to any
Global Security, the Company, the Registrar and the Trustee shall be entitled
to treat the Person in whose name such Global Security is registered as the
absolute owner of such Security for all purposes of this Indenture, and neither
the Company, the Registrar nor the Trustee shall have any responsibility or
obligation to any Agent Members or other beneficial owners of the Securities
represented by such Global Security. 
Without limiting the immediately preceding sentence, neither the
Company, the Registrar nor the Trustee shall have any responsibility or obligation
with respect to (a) the accuracy of the records of any Depositary or any other
Person with respect to any ownership interest in any Global Security, (b) the
delivery to any Person, other than a Holder, of any notice with respect to the
Securities represented by a Global Security, including any notice of redemption
or refunding, (c) the selection of the particular Securities or portions
thereof to be redeemed or refunded in the event of

 

21

 

a partial
redemption or refunding of part of the Securities Outstanding or (d) the
payment to any Person, other than a Holder, of any amount with respect to the
principal of, redemption premium, if any, purchase price or interest (including
Contingent Interest and Liquidated Damages) with respect to any Global
Security.

 

Section 2.13.  CUSIP Numbers. 
The Company may issue the Securities with one or more “CUSIP” numbers
(if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers
in notices of redemption as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.  The Company will promptly notify the Trustee
of any change in the CUSIP numbers.

 

ARTICLE
3

REDEMPTION AND PURCHASES

 

Section 3.01.  Right To Redeem; Notices To Trustee.

 

(a)           Optional Redemption.  The Company, at its option, may redeem the
Securities in accordance with the provisions of paragraphs 5 and 7 of the
Securities and at the Redemption Price specified in paragraph 5 of the Securities,
together with accrued but unpaid interest (including Contingent Interest and
Liquidated Damages, if any), thereon up to but not including the Redemption
Date; provided that if the Redemption Date is on or after an interest record
date, but on or prior to the related interest payment date, interest will be
payable to the Holders in whose names the Securities are registered at the
close of business on the relevant record date for payment of such interest.

 

(b)           Notice to Trustee.  If the Company elects to redeem Securities
pursuant to this Section 3.01, it shall notify the Trustee in writing of
the Redemption Date, the principal amount of Securities to be redeemed and the
Redemption Price.  The Company shall give
the notice to the Trustee provided for in this Section 3.01(b) by a
Company Order at least 30 days but not more than 60 days before the Redemption
Date (unless a shorter notice shall be satisfactory to the Trustee).

 

Section 3.02.  Selection of Securities to Be Redeemed.  If less than all the Securities are to be
redeemed, subject to the procedures of the Depositary in the case of Global
Securities to be so redeemed, the Trustee shall select the Securities to be
redeemed by any method that the Trustee deems fair and appropriate.  The Trustee may select for redemption
portions of the principal amount of Securities that have denominations of
$1,000 and integral multiples thereof.

 

Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.  The Trustee shall notify the Company
promptly of the Securities or portions of Securities to be redeemed.

 

22

 

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

 

Section 3.03.  Notice of Redemption.  At least 30 days but not more than 60 days
before a Redemption Date, the Company shall mail a notice of redemption by
first-class mail, postage prepaid, to each Holder of Securities to be redeemed.

 

The notice shall identify the Securities to be redeemed and shall state:

 

(a)           the Redemption Date;

 

(b)           the Redemption Price and, to the
extent known at the time of such notice the amount of interest (including
Contingent Interest and Liquidated Damages, if any), payable on the Redemption
Date;

 

(c)           the current Conversion Price;

 

(d)           the name and address of the Paying
Agent and Conversion Agent;

 

(e)           that Securities called for redemption
may be converted at any time before the close of business on the second
Business Day immediately preceding the Redemption Date;

 

(f)            that Holders who want to convert
Securities must satisfy the requirements set forth in paragraph 8 of the
Securities;

 

(g)           that Securities called for redemption
must be surrendered to the Paying Agent to collect the Redemption Price
therefor, together with accrued but unpaid interest (including Contingent
Interest and Liquidated Damages, if any);

 

(h)           if fewer than all the outstanding
Securities are to be redeemed, the certificate numbers, if any, and principal
amounts of the particular Securities to be redeemed;

 

(i)            that, unless the Company defaults in
making such payment, interest (including Contingent Interest and Liquidated
Damages, if any), on Securities called for redemption will cease to accrue on
and after the Redemption Date and the Securities will cease to be convertible;
and

 

(j)            the CUSIP number of the Securities.

 

At the Company’s request, the Trustee shall give the notice of
redemption in the Company’s name and at the Company’s expense; provided that
the Company makes such request prior to the date by which such notice of
redemption must be given to Holders in accordance with this Section 3.03
and the Company provides the Trustee with all information required for such
notice of redemption.

 

23

 

Section 3.04.  Effect of Notice of Redemption.  Once notice of redemption is given,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price together with accrued but unpaid interest
(including Contingent Interest and Liquidated Damages, if any), thereon stated
in the notice, except for Securities which are converted in accordance with the
terms of this Indenture.  Upon surrender
to the Paying Agent, such Securities shall be paid at the Redemption Price
stated in the notice, together with accrued but unpaid interest (including
Contingent Interest and Liquidated Damages, if any), thereon, up to but not
including the Redemption Date.

 

Section 3.05.  Deposit of Redemption Price.  Prior to 11:00 a.m. (New York City time) on
the Redemption Date, the Company shall deposit with the Paying Agent (or if the
Company or a Subsidiary or an Affiliate of either of them is the Paying Agent,
shall segregate and hold in trust) money sufficient to pay the aggregate
Redemption Price of all Securities to be redeemed on that date, together with
accrued but unpaid interest (including Contingent Interest and Liquidated
Damages, if any), thereon, up to but not including the Redemption Date other
than Securities or portions of Securities called for redemption that on or
prior thereto have been delivered by the Company to the Trustee for
cancellation or have been converted. 
The Paying Agent shall as promptly as practicable return to the Company
any money not required for that purpose because of conversion of Securities
pursuant to Article 10.  If such
money is then held by the Company in trust and is not required for such purpose
it shall be discharged from such trust.

 

Section 3.06.  Securities Redeemed in Part.  Upon surrender of a Security that is
redeemed in part, the Company shall execute and the Trustee shall authenticate
and deliver to the Holder, without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to, and in exchange for, the unredeemed
portion of the principal amount of the Security surrendered.

 

Section 3.07.  Sinking Fund. 
There shall be no sinking fund provided for the Securities.

 

Section 3.08.  Purchase of
Securities at Option of the Holder.

 

(a)           General. 
Securities shall be purchased by the Company in accordance with the provisions
of paragraph 6 of the Securities on July 18, 2010, July 18, 2013 and
July 18, 2018 (each, a “Purchase Date”) at a purchase price in cash
per Security equal to 100% of the aggregate principal amount of the Security
(the “Purchase Price”),
together with accrued but unpaid interest (including Contingent Interest and
Liquidated Damages, if any), thereon, up to but not including the Purchase
Date.

 

Purchases of Securities hereunder shall be made, at the option of the
Holder thereof, upon:

 

(i)            delivery to the
Company and the Paying Agent by the Holder of a written notice of purchase (a “Purchase
Notice”) at any time from the opening of business on the date that is 30
Business Days prior to the Purchase Date until the close of business on the
Business Day prior to such Purchase Date stating:

 

24

 

(A)          the certificate
number of the Security which the Holder will deliver to be purchased;

 

(B)           the portion of the
principal amount of the Security which the Holder will deliver to be purchased,
which portion must be in principal amounts of $1,000 or an integral multiple
thereof; and

 

(C)           that such Security
shall be purchased as of the Purchase Date pursuant to the terms and conditions
specified in paragraph 6 of the Securities and in this Indenture.

 

(ii)           delivery or
book-entry transfer of such Security to the Paying Agent prior to, on or after
the Purchase Date (together with all necessary endorsements) at the offices of
the Paying Agent, such delivery being a condition to receipt by the Holder of
the Purchase Price therefor, together with accrued but unpaid interest
(including Contingent Interest and Liquidated Damages, if any); provided,
however, that such Purchase Price, together with accrued but unpaid
interest (including Contingent Interest and Liquidated Damages, if any), shall
be so paid pursuant to this Section 3.08 only if the Security so delivered
to the Paying Agent shall conform in all respects to the description thereof in
the related Purchase Notice, as determined by the Company in its sole
discretion.

 

The Company shall purchase from the Holder thereof, pursuant to this
Section 3.08, a portion of a Security if the principal amount of such
portion is $1,000 or an integral multiple of $1,000.  Provisions of this Indenture that apply to the purchase of all of
a Security also apply to the purchase of such portion of such Security.

 

Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.08 shall be consummated by the delivery of the
consideration to be received by the Holder promptly following the later of the
Purchase Date and the time of delivery or book-entry transfer of the Security.

 

Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Purchase Notice contemplated by this
Section 3.08(a) shall have the right to withdraw such Purchase Notice at
any time prior to the close of business on the Purchase Date by delivery of a
written notice of withdrawal to the Paying Agent at the principal office of the
Paying Agent in accordance with Section 3.10.

 

The Paying Agent shall promptly notify the Company of the receipt by it
of any Purchase Notice or written notice of withdrawal thereof.

 

(b)           Company Notice.  In connection with any purchase of Securities
pursuant to Section 3.08 or 3.09, the Company shall give written notice of
the Purchase Date or Change in Control Purchase Date, as applicable, to the
Holders (the “Company Notice”). 
The Company Notice shall be sent by first-class mail to the Trustee and
to each Holder not less than 30 Business Days prior to any Purchase Date (the “Company
Notice Date”) or not more than 30

 

25

 

days after the occurrence of a
Change in Control, as the case may be. 
Each Company Notice shall include a form of Purchase Notice to be
completed by a Holder and shall state:

 

(i)            the Purchase Price,
Change in Control Purchase Price, Conversion Price and, to the extent known at
the time of such notice, the amount of Contingent Interest and Liquidated
Damages, if any, that will be payable with respect to the Securities on the
Purchase Date;

 

(ii)           the name and
address of the Paying Agent and the Conversion Agent;

 

(iii)          that Securities as
to which a Purchase Notice or Change in Control Purchase Notice has been given
may be converted only if the applicable Purchase Notice or Change in Control
Purchase Notice has been withdrawn in accordance with the terms of this
Indenture;

 

(iv)          that Securities must
be surrendered to the Paying Agent to collect payment of the Purchase Price or
Change in Control Purchase Price and accrued but unpaid interest and Contingent
Interest and Liquidated Damages, if any;

 

(v)           that the Purchase
Price or Change in Control Purchase Price for any Securities as to which a
Purchase Notice or Change in Control Purchase Notice has been given and not
withdrawn, together with any accrued Contingent Interest and Liquidated Damages
payable with respect thereto, shall be paid promptly following the later of the
Purchase Date or Change in Control Purchase Date and the time of surrender of
such Securities as described in (iv);

 

(vi)          the procedures the
Holder must follow under Section 3.08 or Section 3.09, as the case
may be;

 

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

 

(viii)        that, unless the
Company defaults in making payment of such Purchase Price or Change in Control
Purchase Price, interest (including Contingent Interest and Liquidated Damages,
if any), on Securities covered by any Purchase Notice or Change in Control
Purchase Notice will cease to accrue on and after the Purchase Date or Change
in Control Purchase Date;

 

(ix)           the CUSIP or ISIN
number of the Securities; and

 

(x)            the procedures for
withdrawing a Purchase Notice or Change in Control Purchase Notice (as
specified in Section 3.10).

 

At the Company’s request and at the Company’s expense, the Trustee
shall give the Company Notice in the Company’s name; provided, however, that,
in all cases, the text of the Company Notice shall be prepared by the Company.

 

26

 

Section 3.09.  Purchase of Securities
at Option of the Holder upon Change in Control.

 

(a)           If at any time that Securities
remain outstanding there shall have occurred a Change in Control, Securities
shall be repurchased by the Company, at the option of the Holder thereof, at a
purchase price in cash (the “Change in Control Purchase Price”) equal to
the principal amount plus accrued but unpaid interest (including Contingent
Interest and Liquidated Damages, if any), thereon, up to but not including the date (the “Change in
Control Purchase Date”) fixed by the Company that is not less than 30 days
nor more than 45 days after the date the Company Notice is given, subject to
satisfaction by or on behalf of the Holder of the requirements set forth in
Section 3.09(c); provided that if
the Change in Control Purchase Date is on or after an interest record date but
on or prior to the related interest payment date, interest and Liquidated
Damages, if any, will be payable to the Holders in whose names the Securities
are registered at the close of business on the relevant record date.

 

(b)           The Company, or at
its request (which must be received by the Trustee at least three Business Days
(or such lesser period as agreed to by the Trustee) prior to the date the
Trustee is requested to give such notice as described below) the Trustee in the
name of and at the expense of the Company, shall mail to all Holders of record
of the Securities a notice (a “Company Change in Control Notice”) of the
occurrence of a Change in Control and of the repurchase right arising as a
result thereof, including the information required by Section 3.08(b)
hereof, not more than 30 days after the occurrence of such Change in Control.  The Company shall promptly furnish to the
Trustee a copy of such notice.

 

(c)           For a Security to be
so repurchased at the option of the Holder, the Paying Agent must receive such
Security with the form entitled “Option to Elect Repurchase Upon a Change in
Control” (a “Change in Control Purchase Notice”) on the reverse thereof
duly completed, together with such Security duly endorsed for transfer, on or
before the Change in Control Purchase Date. 
All questions as to the validity, eligibility (including time of receipt)
and acceptance of any Security for redemption shall be determined by the
Company, whose determination shall be final and binding.

 

The Company shall purchase from the Holder thereof, pursuant to this
Section 3.09, a portion of a Security if the principal amount of such
portion is $1,000 or an integral multiple of $1,000.  Provisions of this Indenture that apply to the purchase of all of
a Security also apply to the purchase of such portion of such Security.

 

Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.09 shall be consummated by the delivery of the
consideration to be received by the Holder promptly following the later of the
Change in Control Purchase Date and the time of delivery of the Security to the
Paying Agent in accordance with this Section 3.09.

 

Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Change in Control Purchase Notice contemplated by this
Section 3.09(c) shall have the right to withdraw such Change in Control
Purchase Notice at any time prior to the close of business on the Change in
Control Purchase Date by delivery of a written notice of withdrawal to the
Paying Agent in accordance with Section 3.10.

 

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

 

27

 

Notwithstanding anything herein to the contrary, the Company’s
obligations pursuant to this Section 3.09 shall be satisfied if a third
party makes an offer to repurchase outstanding Securities after a Change in
Control in the manner and at the times and otherwise in compliance in all
material respects with the requirements of this Section 3.09 and purchases
all Securities properly tendered and not withdrawn pursuant to the requirements
of this Section 3.09.

 

Section 3.10.  Effect of Purchase Notice
or Change in Control Purchase Notice. 
Upon receipt by the Paying Agent of the Purchase Notice or Change in
Control Purchase Notice specified in Section 3.08 or Section 3.09(c),
as applicable, the Holder of the Security in respect of which such Purchase
Notice or Change in Control Purchase Notice, as the case may be, was given
shall (unless such Purchase Notice or Change in Control Purchase Notice is
withdrawn as specified in the following two paragraphs) thereafter be entitled
to receive solely the Purchase Price or Change in Control Purchase Price,
together with accrued but unpaid interest (including Contingent Interest and
Liquidated Damages, if any), thereon, to but not including the Purchase Date or Change in
Control Purchase Date, as the case may be, with respect to such Security.  Such Purchase Price or Change in Control
Purchase Price, together with accrued but unpaid interest (including Contingent
Interest and Liquidated Damages, if any),
thereon, to but not including the Purchase Date or Change in Control
Purchase Date, as the case may be, shall be paid to such Holder, subject to
receipt of funds by the Paying Agent, promptly following the later of (x) the
Purchase Date or the Change in Control Purchase Date, as the case may be, with
respect to such Security (provided that the conditions in Section 3.08 or
Section 3.09, as applicable, have been satisfied) and (y) the time of
delivery or book-entry transfer of such Security to the Paying Agent by the
Holder thereof in the manner required by Section 3.08 or
Section 3.09(c), as applicable. 
Securities in respect of which a Purchase Notice or Change in Control
Purchase Notice, as the case may be, has been given by the Holder thereof may
not be converted pursuant to Article 10 hereof on or after the date of the
delivery of such Purchase Notice or Change in Control Purchase Notice, as the
case may be, unless such Purchase Notice or Change in Control Purchase Notice,
as the case may be, has first been validly withdrawn as specified in the
following two paragraphs.

 

A Purchase Notice or Change in Control Purchase Notice, as the case may
be, may be withdrawn by means of a written notice of withdrawal delivered to
the office of the Paying Agent in accordance with the Purchase Notice or Change
in Control Purchase Notice, as the case may be, at any time prior to the close
of business on the Purchase Date or prior to the close of business on the
Change in Control Purchase Date, as the case may be, specifying:

 

(i)            the
certificate number, if any, of the Security in respect of which such notice of
withdrawal is being submitted;

 

(ii)           the
principal amount of the Security with respect to which such notice of
withdrawal is being submitted; and

 

(iii)          the
principal amount, if any, of such Security which remains subject to the
original Purchase Notice or Change in Control Purchase Notice, as the case may
be, and which has been or will be delivered for purchase by the Company.

 

28

 

There shall be no purchase of any Securities pursuant to
Section 3.08 or Section 3.09 or redemption pursuant to
Section 3.01 if there has occurred prior to, on or after, as the case may
be, the giving, by the Holders of such Securities, of the required Purchase
Notice (or Change in Control Purchase Notice, as the case may be) and is
continuing an Event of Default (other than a default in the payment of the
Purchase Price or Change in Control Purchase Price, as the case may be).  The Paying Agent will promptly return to the
respective Holders thereof any Securities (x) with respect to which a Purchase
Notice or Change in Control Purchase Notice, as the case may be, has been
withdrawn in compliance with this Indenture, or (y) held by it during the
continuance of an Event of Default (other than a default in the payment of the
Purchase Price or Change in Control Purchase Price, as the case may be) in
which case, upon such return, the Purchase Notice or Change in Control Purchase
Notice with respect thereto shall be deemed to have been withdrawn.

 

Section 3.11.  Deposit of Purchase Price
or Change in Control Purchase Price. 
Prior to 11:00 a.m.  (New York
City time) on the Business Day prior to the Purchase Date or the Change in
Control Purchase Date, as the case may be, the Company shall deposit with the
Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an
Affiliate of either of them is acting as the Paying Agent, shall segregate and
hold in trust as provided in Section 2.04) an amount of money (in
immediately available funds if deposited on such Business Day) sufficient to
pay the aggregate Purchase Price or Change in Control Purchase Price, as the
case may be, together with accrued but unpaid interest (including Contingent
Interest and Liquidated Damages, if any) thereon, to but not including the
Purchase Date or Change in Control Purchase Date, as the case may be, of all
the Securities or portions thereof which are to be purchased as of the Purchase
Date or Change in Control Purchase Date, as the case may be.

 

Section 3.12.  Securities Purchased in
Part.  Any Certificated Security
that is to be purchased only in part shall be surrendered at the office of the
Paying Agent (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly
authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security, without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder in aggregate principal amount equal to, and in
exchange for, the portion of the principal amount of the Security so
surrendered which is not purchased.

 

Section 3.13.  Covenant to Comply with
Securities Laws upon Purchase of Securities.  When complying with the provisions of Sections 3.08 or 3.09
hereof (provided that such offer or purchase constitutes an “issuer tender
offer” for purposes of Rule 13e-4 (which term, as used herein, includes any
successor provision thereto) under the Exchange Act at the time of such offer
or purchase), the Company shall (i) comply in all material respects with Rule
13e-4 and Rule 14e-1 under the Exchange Act, (ii) file the related
Schedule TO (or any successor schedule, form or report) under the Exchange
Act, and (iii) otherwise comply in all material respects with all Federal and
state securities laws so as to permit the rights and obligations under Sections
3.08 or 3.09 to be exercised in the time and in the manner specified in
Sections 3.08 or 3.09.

 

29

 

Section 3.14.  Repayment to the Company.  The Trustee and the Paying Agent shall
return to the Company any cash that remains unclaimed as provided in paragraph
11 of the Securities, together with interest or dividends, if any, thereon
(subject to the provisions of Section 7.01(f)), held by them for the
payment of the Purchase Price or Change in Control Purchase Price, as the case
may be, and accrued but unpaid interest (including Contingent Interest and
Liquidated Damages, if any); provided, however, that to the
extent that the aggregate amount of cash deposited by the Company pursuant to
Section 3.11 exceeds the aggregate Purchase Price or Change in Control
Purchase Price, as the case may be, of the Securities or portions thereof which
the Company is obligated to purchase as of the Purchase Date or Change in
Control Purchase Date, as the case may be, and accrued but unpaid interest
thereon (including Contingent Interest and Liquidated Damages, if any), then,
unless otherwise agreed in writing with the Company, promptly after the
Business Day following the Purchase Date or Change in Control Purchase Date, as
the case may be, the Trustee shall return any such excess to the Company
together with interest or dividends, if any, thereon (subject to the provisions
of Section 7.01(f)).

 

ARTICLE
4

COVENANTS

 

Section 4.01.  Payment of Securities.  The Company shall promptly make all payments
in respect of the Securities on the dates and in the manner provided in the
Securities or pursuant to this Indenture. 
Any amounts to be given to the Trustee or Paying Agent, as the case may
be, shall be deposited with the Trustee or Paying Agent, as the case may be, by
11:00 a.m.  (New York City time), on the
dates required pursuant to Section 2.04 hereof.  Interest installments, Liquidated Damages, principal amount,
Redemption Price, Purchase Price, Change in Control Purchase Price and
interest, if any, due on overdue amounts shall be considered paid on the
applicable date due if at 11:00 a.m. 
(New York City time) on such date (or, in the case of a Purchase Price
or Change in Control Purchase Price, on the Business Day prior to the
applicable Purchase Date or Change in Control Purchase Date, as the case may
be) the Trustee or the Paying Agent, as the case may be, holds, in accordance
with this Indenture, money sufficient to pay all such amounts then due.

 

The Company shall, to the extent permitted by law, pay interest on
overdue amounts at the rate per annum set forth in paragraph 1 of the
Securities, compounded semiannually, which interest shall accrue from the date
such overdue amount was originally due to the date payment of such amount,
including interest thereon, has been made or duly provided for.  All such interest shall be payable on
demand.  The accrual of such interest on
overdue amounts shall be in addition to the continued accrual of interest on
the Securities.

 

Section 4.02. 
SEC and Other Reports.  The Company shall file with the Trustee,
within 15 days after it files such annual and quarterly reports, information,
documents and other reports with the SEC, copies of its annual report and of
the information, documents and other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act.  In the event the
Company is at any time no longer subject to the

 

30

 

reporting requirements of
Section 13 or 15(d) of the Exchange Act, it shall continue to provide the
Trustee with reports containing substantially the same information as would
have been required to be filed with the SEC had the Company continued to have
been subject to such reporting requirements. 
In such event, such reports shall be provided to the Trustee at the
times the Company would have been required to provide reports had it continued
to have been subject to such reporting requirements.  In addition, the Company shall comply with the other provisions
of TIA Section 314(a).

 

Section 4.03. 
Compliance Certificate.  The Company shall deliver to the Trustee
within 120 days after the end of each fiscal year of the Company (beginning
with the fiscal year ending on September 30, 2003) an Officers’
Certificate, stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and if the Company
shall be in default, specifying all such Defaults and the nature and status
thereof of which they may have knowledge.

 

Section 4.04. 
Further Instruments and
Acts.  Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.

 

Section 4.05.  Maintenance of Office
or Agency.  The Company will
maintain in the Borough of Manhattan, The City of New York, an office or agency
of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities
may be presented or surrendered for payment, where Securities may be
surrendered for registration of transfer, exchange, purchase, redemption or
conversion and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served.  The Trustee’s office located at American Stock Transfer &
Trust Company, 59 Maiden Lane, New York, New York, 10038 shall initially be
such office or agency for all of the aforesaid purposes.  The Company shall give prompt written notice
to the Trustee of the location, and of any change in the location, of any such
office or agency (other than a change in the location of the office or agency
of the Trustee).  If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 12.02. 
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York, for such purposes.

 

Section 4.06. 
Delivery of Certain
Information.  At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, upon
the request of a Holder or any Beneficial Owner of Securities or holder or
Beneficial Owner of Common Stock delivered upon conversion thereof, the Company
will promptly furnish or cause to be furnished Rule 144A Information (as
defined below) to such Holder or any Beneficial Owner of Securities or holder
or Beneficial Owner of Common Stock, or to a prospective purchaser of any such
security

 

31

 

designated by any such holder,
as the case may be, to the extent required to permit compliance by such Holder
or holder with Rule 144A under the Securities Act in connection with the resale
of any such security.  “Rule 144A
Information” shall be such information as is specified pursuant to Rule
144A(d)(4) under the Securities Act or any successor provisions.  Whether a Person is a Beneficial Owner shall
be determined by the Company to the Company’s reasonable satisfaction.

 

Section 4.07. 
Tax Treatment of Securities.  The Company and the Holders, by purchasing
the Securities, agree that (i) the Securities are contingent payment debt
instruments as defined in Treasury Regulations Section 1.1275-4(b), (ii)
each Holder shall be bound by the Company’s application of the Treasury
Regulations to the Securities, including the Company’s determination that the
rate at which interest will be deemed to accrue on the Securities for United States
federal income tax purposes will be 8.50% compounded semi-annually, which is
the rate comparable to the rate at which the Company would borrow on a
noncontingent, nonconvertible basis with terms and conditions otherwise
comparable to the Securities, (iii) each Holder shall use the projected payment
schedule with respect to the Securities determined by the Company, as required
by Treasury Regulations Section 1.1275-4(b)(4)(iv), to determine its
interest accruals and adjustments as provided in Treasury Regulations
Section 1.1275-4(b), and (iv) the Company and each Holder will not take
any position on a tax return inconsistent with (i), (ii), or (iii), unless
required by applicable law.

 

Section 4.08. 
Liquidated Damages.  If at any time Liquidated Damages become
payable by the Company pursuant to the Registration Rights Agreement, the
Company shall promptly deliver to the Trustee a certificate to that effect and
stating (i) the amount of such Liquidated Damages that are payable and (ii) the
date on which such damages are payable pursuant to the terms of the
Registration Rights Agreement.  Unless
and until a Responsible Officer of the Trustee receives such a certificate, the
Trustee may assume without inquiry that no Liquidated Damages are payable.  If the Company has paid Liquidated Damages
directly to the Persons entitled to them, the Company shall deliver to the
Trustee a certificate setting forth the particulars of such payment.

 

ARTICLE
5

SUCCESSOR CORPORATION

 

Section 5.01. 
When the Company
May Merge or Transfer Assets. 
The Company shall not consolidate with or merge with or into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, unless:

 

(i)            (1)
the Company shall be the continuing corporation or (2) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance, transfer or lease the
properties and assets of the Company substantially as an entirety (a) shall be
a corporation or limited liability company organized and validly existing under
the laws of the United States or any State thereof or the District of Columbia,
and (b) shall expressly assume, by an indenture supplemental hereto,

 

32

 

executed and delivered to the Trustee, in form satisfactory to the
Trustee, all of the obligations of the Company under the Securities and this
Indenture;

 

(ii)           immediately
after giving effect to such transaction, no Default shall have occurred and be continuing; and

 

(iii)          the
Company shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, comply with this Article 5 and that all conditions
precedent herein provided for relating to such transaction have been satisfied.

 

For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise) of the properties and assets of one or more Subsidiaries (other
than to the Company or another Subsidiary), which, if such assets were owned by
the Company would constitute all or substantially all of the properties and
assets of the Company shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.  The successor Person formed by such
consolidation or into which the Company is merged or the successor Person to which
such conveyance, transfer or lease is made shall succeed to, and (except in the
case of a lease) be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor had
been named as the Company herein; and thereafter, except in the case of a lease
and except for obligations the Company may have under a supplemental indenture
pursuant to Section 9.06, the Company shall be discharged from all
obligations and covenants under this Indenture and the Securities.  Subject to Section 9.06, the Company,
the Trustee and the successor Person shall enter into a supplemental indenture
to evidence the succession and substitution of such successor Person and such
discharge and release of the Company, as applicable.

 

ARTICLE
6

DEFAULTS AND REMEDIES

 

Section 6.01.  Events of Default.  Subject to the provisions set forth below in
this Section 6.01, each of the following events is an “Event of Default”:

 

(a)           the failure to pay
interest (including Contingent Interest and Liquidated Damages, if any) on any
Securities when the same becomes due and payable and the default continues for
a period of 30 days, whether or not such failure shall be due to compliance
with Article 11 of this Indenture or agreements with respect to any other
Indebtedness or any other reason;

 

(b)           the failure to pay
the principal of any Securities, when such principal becomes due and payable,
at maturity, upon acceleration, upon redemption or otherwise (including the
failure to make an offer to repurchase the Securities upon a Change in

 

33

 

Control or make a payment to
purchase Securities tendered pursuant to a Purchase Notice or Change in Control
Purchase Notice), whether or not such failure shall be due to compliance with
Article 11 of this Indenture or agreements with respect to any other
Indebtedness or any other reason;

 

(c)           the failure to
provide a Company Change in Control Notice in accordance with the terms of
Section 3.09(b) hereof;

 

(d)           a default in the
observance or performance of any other covenant or agreement contained in this
Indenture which default continues for a period of 30 days after the Company
receives written notice specifying the default (and demanding that such default
be remedied) from the Trustee or the Holders of at least 25% of the outstanding
principal amount of the Securities (except in the case of a default with
respect to Section 5.01, which will constitute an Event of Default with
such notice requirement but without such passage of time requirement);

 

(e)           the failure to pay
at final maturity (giving effect to any applicable grace periods and any
extensions thereof) the principal amount of any Recourse Indebtedness of the
Company or any Subsidiary of the Company, or the acceleration of the final
stated maturity of any such Recourse Indebtedness if the aggregate principal
amount of such Recourse Indebtedness, together with the principal amount of any
other such Recourse Indebtedness in default for failure to pay principal at
final maturity or which has been accelerated, aggregates $25.0 million or more
at any time;

 

(f)            one or more
judgments in an aggregate amount in excess of $25.0 million shall have been
rendered against the Company or any of its Subsidiaries and remain
undischarged, unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and nonappealable;

 

(g)           The Company or any
of its Significant Subsidiaries pursuant to or under or within the meaning of
any Bankruptcy Law:

 

(i)            commences
a voluntary case or proceeding;

 

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

 

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

 

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

 

(v)           shall
generally not pay its debts when such debts become due or shall admit in
writing its inability to pay its debts generally; or

 

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

 

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

 

34

 

(ii)           appoints
a custodian of the Company or any Significant Subsidiary of the Company for all
or substantially all of its properties; or

 

(iii)          orders
the liquidation of the Company or any Significant Subsidiary of Company;

 

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

 

The Events of Default described in clauses (e), (f), (g) and (h) above
with respect to a Subsidiary shall not apply if such Person was not a
Subsidiary at the time such event or condition occurred unless, in the case of
clause (e) or (f) above, the Company or another Subsidiary thereof assumes or
otherwise becomes liable for the liability referred to therein or the
liabilities generally of such Person.

 

Section 6.02.  Acceleration.

 

(a)           If an Event of
Default (other than an Event of Default specified in clause (g) or (h) of
Section 6.01) shall occur and be continuing, the Trustee may, and at the
request of the Holders of at least 25% in principal amount of outstanding
Securities shall, declare the principal of and accrued interest (including
Contingent Interest and Liquidated Damages, if any), on all the Securities to
be due and payable by notice in writing to the Company (the “Acceleration
Notice”).  Such notice shall specify
the respective Event of Default and that it is a “notice of acceleration.”  Upon the giving of such notice, the
principal of and accrued but unpaid interest (including Contingent Interest and
Liquidated Damages, if any) on all Securities (i) shall become immediately
due and payable or (ii) if there are any amounts outstanding under the
Credit Agreement, shall become immediately due and payable upon the first to
occur of an acceleration under the Credit Agreement or five Business Days after
receipt by the Company and the Representative under the Credit Agreement of
such Acceleration Notice but only if such Event of Default is then
continuing.  If an Event of Default
specified in clause (g) or (h) of Section 6.01 occurs and is
continuing with respect to Company, then all unpaid Obligations on all of the
outstanding Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder.

 

(b)           At any time after a
declaration of acceleration with respect to the Securities as described in the
preceding paragraph, the Holders of a majority in aggregate principal amount of
the Securities may rescind and cancel such declaration and its consequences
(i) if the rescission would not conflict with any judgment or decree,
(ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of such
acceleration, (iii) if interest on overdue installments of interest (to
the extent the payment of such interest is lawful) and on overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, (iv) if the Company has paid the Trustee its reasonable
compensation and reimbursed the Trustee for its expenses, disbursements and
advances and (v) in the event of the cure or waiver of an Event of Default
of the type described in clause (e) of Section 6.01, the Trustee shall
have received an Officers’ Certificate and an Opinion of Counsel that such
Event of Default has been cured or waived. 
No such rescission shall affect any subsequent Default or impair any
right consequent thereto.

 

35

 

Section 6.03. 
Other Remedies.  If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the principal amount of all the Securities plus accrued but unpaid interest
(including Contingent Interest and Liquidated Damages, if any), thereon, or to enforce the performance
of any provision of the Securities or this Indenture.

 

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

 

Section 6.04. 
Waiver of Past Defaults.  The Holders of a majority in aggregate
principal amount of the Securities at the time outstanding, by notice in
writing to the Trustee (and without notice to any other Securityholder), may
waive an existing Default and its consequences, except (i) an Event of Default
described in Section 6.01(a) or 6.01(b), (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of
each Holder affected or (iii) a Default which constitutes a failure to convert
any Security in accordance with the terms of Article 10.  When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.  This
Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and
such Section 316(a)(1)(B) is hereby expressly excluded from this
Indenture, as permitted by the TIA.

 

Section 6.05.  Control by Majority.  The Holders of a majority in aggregate
principal amount of the Securities at the time outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee.  However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture or that the Trustee
determines in good faith is unduly prejudicial to the rights of other Holders
or would involve the Trustee in personal liability unless the Trustee is
offered indemnity satisfactory to it. 
This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of
the TIA and such Section 316(a)(1)(A) is hereby expressly excluded from
this Indenture, as permitted by the TIA.

 

Section 6.06.  Limitation on Suits.  A Holder may not pursue
any remedy with respect to this Indenture or the Securities unless:

 

(a)           the Holder gives to the
Trustee written notice stating that an Event of Default is continuing;

 

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

 

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

 

36

 

(d)           the Trustee does not comply
with the request within 60 days after receipt of such notice, request and offer
of security or indemnity; and

 

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

 

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

 

Section 6.07. 
Rights of Holders to
Receive Payment.  Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of interest installments (including Contingent Interest and Liquidated
Damages, if any), the principal amount, Redemption Price, Purchase Price,
Change in Control Purchase Price or interest, if any, due on overdue amounts in
respect of the Securities held by such Holder, on or after the respective due
dates expressed in the Securities, and to convert the Securities in accordance
with Article 10, or to bring suit for the enforcement of any such payment
on or after such respective dates or the right to convert, shall not be
impaired or affected adversely without the consent of such Holder.

 

Section 6.08.  Collection Suit by Trustee.  If an Event of Default described in
Section 6.01(a) or 6.01(b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount owing with respect to the Securities and the
amounts provided for in Section 7.07.

 

Section 6.09. 
Trustee May File Proofs of Claim.  In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company or any other
obligor upon the Securities or the property of the Company or of such other
obligor or their creditors, the Trustee (irrespective of whether any amounts in
respect of the Securities shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of any such amount) shall be
entitled and empowered, by intervention in such proceeding or otherwise,

 

(a)           to file and prove a claim for
any accrued but unpaid amounts
due in respect of the Securities, and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel or any other amounts due
the Trustee under Section 7.07) and of the Holders allowed in such
judicial proceeding, and

 

(b)           to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same;

 

and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or similar official in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay the Trustee any amount due it
for the reasonable compensation, expenses,

 

37

 

disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07.

 

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

 

Section 6.10.  Priorities.  If the Trustee collects any money pursuant
to this Article 6, it shall pay out the money in the following order:

 

FIRST:  to the Trustee for
amounts due under Section 7.07;

 

SECOND:  to Holders for amounts
due and unpaid on the Securities and for any accrued but unpaid interest amounts due in respect of the Securities,
ratably, without preference or priority of any kind, according to such amounts
due and payable on the Securities ; and

 

THIRD:  the balance, if any, to
the Company.

 

The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10. 
At least 15 days before such record date, the Trustee shall mail to each
Securityholder and the Company a notice that states the record date, the
payment date and the amount to be paid.

 

Section 6.11.  Suits. 
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant (other than the Trustee) in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys’ fees and expenses, against any party litigant
in the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. 
This Section 6.11 does not apply to a suit by the Trustee, a suit
by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10%
in aggregate principal amount of the Securities at the time outstanding.  This Section 6.11 shall be in lieu of
Section 315(e) of the TIA and such Section 315(e) is hereby expressly
excluded from this Indenture, as permitted by the TIA.

 

Section 6.12.  Waiver of Stay, Extension or Usury
Laws.  The Company covenants (to the
fullest extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury or other law wherever
enacted, now or at any time hereafter in force, which would prohibit or forgive
the Company from paying all or any portion of any amounts due in respect of the
Securities, as contemplated herein, or which may affect the covenants or the
performance of this Indenture; and the Company (to the fullest extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.

 

38

 

ARTICLE
7

TRUSTEE

 

Section 7.01.  Duties of Trustee.

 

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

 

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

 

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

 

(ii)           in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture, but in case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of this
Indenture, but need not confirm or investigate the accuracy of mathematical
calculations or other facts stated therein.

 

This Section 7.01(b) shall be in lieu of Section 315(a) of
the TIA and such Section 315(a) is hereby expressly excluded from this
Indenture, as permitted by the TIA.

 

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

 

(i)            this
paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01;

 

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

 

(iii)          the
Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to Section 6.05.

 

Section 7.01(c)(i), (ii)
and (iii) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of
the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby
expressly excluded from this Indenture, as permitted by the TIA.

 

39

 

(d)           Every provision of
this Indenture that in any way relates to the Trustee is subject to
Section 7.01(a), (b), (c), (e) and (f).

 

(e)           The Trustee may
refuse to perform any duty or exercise any right or power or expend or risk its
own funds or otherwise incur any financial liability unless it receives
indemnity satisfactory to it against any loss, liability or expense.

 

(f)            Money held by the
Trustee in trust hereunder need not be segregated from other funds except to
the extent required by law.  The Trustee
(acting in any capacity hereunder) shall be under no liability for interest on any
money received by it hereunder unless otherwise agreed in writing with the
Company.

 

Section 7.02.  Rights of Trustee.  Subject to its duties and responsibilities
under the TIA,

 

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

 

(b)           whenever in the administration of
this Indenture the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may obtain
and, in the absence of bad faith or negligence on its part, conclusively rely
upon an Officers’ Certificate and/or an Opinion of Counsel;

 

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

 

(d)           the Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith which it
reasonably believes to be authorized or within its rights or powers conferred under
this Indenture;

 

(e)           the Trustee may consult with
counsel selected by it and any advice or opinion of such counsel shall be full
and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion of such counsel;

 

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

 

40

 

(g)           any request or
direction of the Company mentioned herein shall be sufficiently evidenced by a
Company Order and any resolution of the Board of Directors shall be
sufficiently evidenced by a Board Resolution;

 

(h)           the Trustee shall not be bound
to make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled, during normal business hours, to
examine the books, records and premises of the Company, personally or by agent
or attorney at the sole cost of
the Company and shall incur no liability or additional liability of any kind by
reason of such inquiry or investigation;

 

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

 

(j)            the rights,
privileges, protections, immunities and benefits given to the Trustee,
including its right to be indemnified, are extended to, and shall be
enforceable by, the Trustee in each of its capacities hereunder (including
Paying Agent, Registrar and Conversion Agent), and to all other Persons
employed to act hereunder, including the Trustee’s officers, employees, agents
and custodians;

 

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

 

(l)            Neither the Trustee
nor any of its officers, directors, employees or agents shall be liable for any
action taken or omitted under this Indenture or in connection therewith except
to the extent caused by the Trustee’s gross negligence, bad faith or willful
misconduct, as determined by the final judgment of a court of competent
jurisdiction, no longer subject to appeal or review.  Anything in this Indenture to the contrary notwithstanding, in no
event shall the Trustee be liable for special, indirect or consequential loss
or damage of any kind whatsoever (including but not limited to lost profits),
even if the Trustee has been advised of the likelihood of such loss or damage
and regardless of the form of action;

 

(m)          The Trustee is not
required to give any bond or surety with respect to the performance of its
duties or the exercise of its powers under this Indenture; and

 

(n)           Notwithstanding
anything else herein contained, whenever any provision of this Indenture
indicates that any confirmation of a condition or event is qualified by the
words “to the knowledge of” or “known to” the Trustee or other words of similar
meaning, said words

 

41

 

shall mean and refer to the
current awareness of one or more Responsible Officers who are located at the
Corporate Trust Office.

 

Section 7.03.  Individual Rights of
Trustee.  The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. 
Any Paying Agent, Registrar, Conversion Agent or co-registrar may do the
same with like rights.  However, the
Trustee must comply with Sections 7.10 and 7.11.

 

Section 7.04.  Trustee’s Disclaimer.  The Trustee makes no representation as to
the validity or adequacy of this Indenture or the Securities, shall not be
accountable for the Company’s use or application of the proceeds from the
Securities, and shall not be responsible for any statement in any registration
statement for the Securities under the Securities Act or in any offering
document for the Securities, the Indenture or the Securities (other than its
certificate of authentication), or the determination as to which beneficial
owners are entitled to receive any notices hereunder.

 

Section 7.05.  Notice of Defaults.  If a Default occurs and if it is known to
the Trustee, the Trustee shall give to each Securityholder notice of all
current Defaults known to it within 90 days after any such Default occurs or,
if later, within 15 days after it is known to the Trustee, unless such Default
shall have been cured or waived before the giving of such notice.  Notwithstanding the preceding sentence,
except in the case of a Default described in Sections 6.01(a) and 6.01(b), the
Trustee may withhold the notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or officers of the
Trustee in good faith determines that withholding the notice is in the
interests of Holders.  The second
sentence of this Section 7.05 shall be in lieu of the proviso to
Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture,
as permitted by the TIA.

 

Section 7.06.  Reports by Trustee to
Holders.  Within 60 days after each
May 15 beginning with the May 15 following the date of this
Indenture, the Trustee shall mail to each Securityholder a brief report dated
as of such May 15 that complies with TIA Section 313(a), if required
by such Section 313(a), but only to the extent any such report is required
to be given pursuant to said TIA Section 313(a), or any successor
provision of the TIA.  The Trustee also
shall comply with TIA Section 313(b).

 

A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each securities exchange, if any, on which the
Securities are listed.  The Company agrees to notify the Trustee promptly whenever
the securities become listed on any Securities exchange and of any delisting
thereof.

 

Section 7.07.  Compensation and Indemnity.  The Company agrees:

 

(a)           to pay to the Trustee from
time to time, and the Trustee shall be entitled to, such compensation as the
Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder (which compensation shall not be limited (to
the extent permitted by law) by
any provision of law in regard to the compensation of a trustee of an express
trust);

 

42

 

(b)           to reimburse the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any provision of this Indenture or any
documents executed in connection
herewith (including the reasonable compensation and the expenses, advances and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence, bad faith or willful
misconduct; and

 

(c)           to indemnify the Trustee or
any predecessor Trustee and their respective agents, officers, directors and
employees for, and to hold them harmless against, any loss, damage, claim,
liability, cost or expense (including attorneys’ fees and expenses and taxes
(other than taxes based upon, measured by or determined by the income of the Trustee)) incurred without
negligence or bad faith on its part, 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 (whether asserted by the Company or any
Holder or any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder.

 

To secure the Company’s payment obligations in this Section 7.07,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee, except that held in trust to pay interest
installments (including Contingent Interest and Liquidated Damages, if any),
the principal amount, Redemption Price, Purchase Price, Change in Control
Purchase Price or interest, if any, due on overdue amounts, as the case may be,
in respect of any particular Securities.

 

The Company’s payment obligations pursuant to this Section 7.07
shall survive the discharge of this Indenture or the earlier termination or
resignation of the Trustee.  When the
Trustee incurs expenses after the occurrence of a Default specified in
Section 6.01(f) or Section 6.01(g), the expenses, including the
reasonable charges and expenses of its counsel, are intended to constitute
expenses of administration under any bankruptcy law.

 

Any amounts due and owing the Trustee hereunder (whether in nature of
fees, expenses, indemnification payments or reimbursement for advances) which
have not been paid by or on behalf of the Company within 15 days following
written notice thereof given to the Company in accordance with the provisions
of Section 12.02, shall bear interest at an interest rate equal to the
Trustee’s announced prime rate in effect from time to time, plus four percent
(4.0%) per annum.

 

Section 7.08. 
Replacement of Trustee.  The Trustee may resign by so notifying the
Company; provided, however, that no such resignation shall be effective until a
successor Trustee has accepted its appointment pursuant to this
Section 7.08.  The Holders of a majority
in aggregate principal amount of
the Securities at the time outstanding may remove the Trustee by so notifying
the Trustee and the Company.  The
Company shall remove the Trustee if:

 

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

 

(b)           the Trustee is
adjudged bankrupt or insolvent;

 

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

 

43

 

(d)           the Trustee
otherwise becomes incapable of acting.

 

If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.

 

A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company satisfactory in form and
substance to the retiring Trustee and the Company.  Thereupon the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture; provided, however,
notwithstanding the foregoing, the effectiveness of any such resignation or
removal shall be conditioned on receipt by the retiring Trustee of all amounts
due and owing under Section 7.07 hereof. 
The successor Trustee shall mail a notice of its succession to
Holders.  The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
subject to the lien provided for in Section 7.07.

 

If a successor Trustee does not take office within 30 days after the
retiring Trustee gives its notice of resignation or is removed, the retiring
Trustee, the Company or the Holders of a majority in aggregate principal amount
of the Securities at the time outstanding may petition any court of competent
jurisdiction at the expense of the Company for the appointment of a successor
Trustee.

 

If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.

 

Section 7.09.  Successor Trustee by Merger
Etc.  If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets (including the administration of the trust
created by this Indenture) to, another Person, the resulting, surviving or
Person corporation without any further act shall be the successor Trustee.

 

Section 7.10.  Eligibility; Disqualification.  The Trustee shall at all times satisfy the
requirements of TIA Section 310(a)(1). 
The Trustee (or its parent holding company) shall have a combined
capital and surplus of at least $10,000,000 as set forth in its most recent
filed annual report of condition. 
Nothing herein contained shall prevent the Trustee from filing with the SEC
the application referred to in the penultimate paragraph of TIA
Section 310(b).  The Trustee shall
comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are
met.

 

Section 7.11.  Preferential Collection
of Claims Against Company.  The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b).  A Trustee who has resigned or been removed shall be subject to
TIA Section 311(a) to the extent indicated therein.

 

44

 

ARTICLE
8

DISCHARGE OF INDENTURE

 

Section 8.01.  Discharge of Liability
on Securities.  When (i) the Company
delivers to the Trustee all outstanding Securities (other than Securities
replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable and the Company deposits
with the Trustee cash sufficient to pay all amounts due and owing on all
outstanding Securities (other than Securities replaced pursuant to
Section 2.07), and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to
Section 7.07, cease to be of further effect.  The Trustee shall join in the execution of a document prepared by
the Company acknowledging satisfaction and discharge of this Indenture on
demand at the cost and expense of the Company and accompanied by an Officers’
Certificate and Opinion of Counsel.

 

Section 8.02.  Repayment to the Company.  The Trustee and the Paying Agent shall
return to the Company upon written request any money held by them for the
payment of any amount and any shares of Common Stock with respect to the
Securities that remain unclaimed for two years, subject to applicable unclaimed
property law.  After return to the
Company, as applicable, Holders entitled to the money or shares of Common Stock
must look to the Company for payment as general creditors unless an applicable
abandoned property law designates another person and the Trustee and the Paying
Agent shall have no further liability to the Holders with respect to such money
or shares of Common Stock for that period commencing after the return thereof.

 

ARTICLE
9

AMENDMENTS

 

Section 9.01.  Without Consent of Holders.  The Company and the Trustee may amend or
supplement this Indenture or the Securities without notice to or consent of any
Securityholder:

 

(a)           to comply with
Article 5 or Section 10.12;

 

(b)           to cure any
ambiguity, omission, defect or inconsistency, or to make any other change that
does not adversely affect the rights of any Securityholder;

 

(c)           to make provisions with
respect to the conversion right of the Holders pursuant to the requirements of
Section 10.12 and Section 10.01;

 

(d)           to evidence and
provide for the acceptance of appointment hereunder by a successor Trustee with
respect to the Securities; or

 

(e)           to comply with the
provisions of the TIA, or with any requirement of the SEC arising as a result
of the qualification of this Indenture under the TIA.

 

45

 

Section 9.02.  With Consent of Holders.  

 

The Company and the Trustee may amend or supplement this Indenture or
the Securities without notice to any Securityholder but with the written
consent of the Holders of a majority in aggregate principal amount of the
Securities then outstanding.  The
Holders of a majority in aggregate principal amount of the Securities then
outstanding may waive compliance by the Company with restrictive provisions of
this Indenture other than as set forth in this Section 9.02 below, and
waive any past Default under this Indenture and its consequences, except a
Default in the payment of amounts due in respect of any Security or in respect
of a provision which under this Indenture cannot be modified or amended without
the consent of the Holder of each outstanding Security affected.

 

Subject to Section 9.04, without the written consent of each
Securityholder affected, however, an amendment, supplement or waiver, including
a waiver pursuant to Section 6.04, may not:

 

(a)           change the Stated Maturity of
the principal of, or any payment date of any installment of interest (including
Contingent Interest or Liquidated Damages, if any), if any, on, any Security;

 

(b)           reduce the principal amount of, or
the rate of interest (including Contingent Interest or Liquidated Damages, if
any), on, any Security, whether upon acceleration, redemption or otherwise, or
alter the manner of calculation of interest or the rate of accrual thereof on
any Security;

 

(c)           change the currency for payment of
principal of, or interest (including Contingent Interest or Liquidated Damages,
if any), or adversely affect the price or ratio at which Common Stock may be
substituted for currency in connection with any payments made;

 

(d)           impair the right to institute suit
for the enforcement of any payment of any amount with respect to any Security
when due;

 

(e)           adversely affect the conversion
rights provided in Article 10;

 

(f)            modify the provisions of this
Indenture requiring the Company to make an offer to repurchase Securities upon
a Change in Control pursuant to Section 3.09 after a Change in Control or
to repurchase the Securities at the option of the Holders pursuant to
Section 3.08 in any case;

 

(g)           reduce the percentage of principal
amount of the outstanding Securities necessary to modify or amend this
Indenture or to consent to any waiver provided for in this Indenture;

 

(h)           waive a Default in the payment of any
amount with respect to any Security when due (except as provided in
Section 6.02); or

 

(i)            make any changes in
Section 6.04, Section 6.07 or this Section 9.02.

 

46

 

It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.

 

After an amendment under this Section 9.02 becomes effective, the
Company shall mail to each Holder a notice briefly describing the
amendment.  Failure to mail the notice
or a defect in the notice shall not effect the validity of the amendment.

 

Section 9.03.  Compliance with Trust
Indenture Act.  Every supplemental
indenture executed pursuant to this Article shall comply with the TIA.

 

Section 9.04.  Revocation and Effect of
Consents.  Until an amendment,
waiver or other action by Holders becomes effective, a consent thereto by a
Holder of a Security hereunder is a continuing consent by the Holder and every
subsequent Holder of that Security or portion of the Security that evidences
the same obligation as the consenting Holder’s Security, even if notation of
the consent, waiver or action is not made on the Security.  However, unless otherwise agreed in writing
by such Holder or a predecessor Holder any such Holder or subsequent Holder may
revoke the consent, waiver or action as to such Holder’s Security or portion of
the Security if the Trustee receives the notice of revocation before the date
the amendment, waiver or action becomes effective.  After an amendment, waiver or action becomes effective, it shall
bind every Securityholder.

 

Section 9.05.  Notation on or Exchange of
Securities.  Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article 9 may, and shall if required by the Trustee, bear
a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture.  If the
Company shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Board of Directors of the Company, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for outstanding
Securities.

 

Section 9.06.  Trustee to Sign Supplemental
Indentures.  The Trustee shall sign
any supplemental indenture authorized pursuant to this Article 9 if the
amendment contained therein does not, in the sole determination of the Trustee,
adversely affect the rights, duties, powers, privileges, benefits, indemnities,
liabilities or immunities of the Trustee. 
If it does, the Trustee may, but need not, sign such supplemental
indenture.  In signing such supplemental
indenture the Trustee shall be entitled to receive, and (subject to the
provisions of Section 7.01) shall be fully protected in relying upon, an
Officers’ Certificate and an Opinion of Counsel stating that such amendment is
authorized or permitted by this Indenture.

 

Section 9.07.  Effect of Supplemental
Indentures.  Upon the execution of
any supplemental indenture under this Article 9, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes, and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.

 

47

 

ARTICLE
10

CONVERSION OF THE SECURITIES

 

Section 10.01.  Conversion Privilege.  Subject to the provisions of this
Article 10, a Holder of a Security may convert such Security into Common
Stock, at the Conversion Price then in effect, if any of the following
conditions is satisfied:

 

(a)           during any calendar
quarter (the “Quarter”) commencing after the Issue Date, if the Closing
Price per share of Common Stock for at least 20 Trading Days in the period of
30 consecutive Trading Days ending on the last Trading Day of the Quarter
immediately preceding such Quarter (appropriately adjusted to take into account
the occurrence, during such 20 Trading Day period, of any event requiring
adjustment of the Conversion Price under this Indenture) is more than 120% of
the Conversion Price on such 30th Trading Day;

 

(b)           the Security has
been called for redemption by the Company pursuant to Section 3.01 and the
redemption has not yet occurred;

 

(c)           the conversion of
such Security occurs during the five Trading Day period immediately after a
period of five consecutive Trading Days in which the Security Trading Price for
each Trading Day in such period was less than 95% of the product of the Closing
Price per share of Common Stock on such Trading Day multiplied by the number of
shares of Common Stock issuable (assuming satisfaction of conditions to
conversion) upon conversion of $1,000 in principal amount of the Securities;

 

(d)           (i) an issuance of
rights, warrants or options referred to in Section 10.06(b) occurs or (ii)
a distribution referred to in Section 10.06(c) occurs where the fair
market value of such distribution per share of Common Stock (as determined by
the Board of Directors of the Company, which determination shall be conclusive
evidence of such fair market value) exceeds 10% of the Closing Price per share
of Common Stock on the Trading Day immediately preceding the date of
declaration of such distribution; or

 

(e)           (i) the Company is
party to a consolidation, merger, share exchange, sale of all or substantially
all of its assets or other similar transaction pursuant to which the Common
Stock is subject to conversion into shares of stock (other than Common Stock),
other securities or property (including cash) subject to Section 10.12 and
(ii) the conversion of such Security occurs at any time from and after the date
that is 15 days prior to the date of the anticipated effective time of such
transaction until and including the date that is 15 days after the actual
effective date of such transaction; provided, however, that if such conversion
occurs after the effective date of such transaction, the Holder will receive on
conversion the consideration determined in accordance with Section 10.12.

 

In the case of the foregoing clause (c), the Trustee (or other
Conversion Agent appointed by the Company) shall have no obligation to
determine the Security Trading Price unless the Company has requested such a
determination; and the Company shall have no obligation to make such request
unless a Holder provides it with reasonable evidence that the Security Trading
Price per $1,000 principal amount of such series of Securities would be less

 

48

 

than 95% of the product of the
Closing Price per share of Common Stock on such Trading Date multiplied by the
number of shares of Common Stock issuable (assuming satisfaction of conditions
to conversion) upon conversion of $1,000 in principal amount of the
Securities.  If such evidence is
provided, the Company shall instruct the Trustee (or other Conversion Agent) to
determine the Securities Trading Price of the Securities beginning on the next
Trading Day and on each successive Trading Day until the Securities Trading
Price per $1,000 principal amount of such Securities is greater than or equal
to 95% of the product of the Closing Price per share of Common Stock on such
Trading Date multiplied by the number of shares of Common Stock issuable (assuming
satisfaction of conditions to conversion) upon conversion of $1,000 in
principal amount of the Securities; provided that the Trustee shall be under no
duty or obligation to make the calculations described in the foregoing clause
(c) or to determine whether the Securities are convertible pursuant to such
section.  The Company shall make the
calculations described in the foregoing clause (c), using the Securities
Trading Price provided by the Trustee.

 

The Trustee shall be entitled at its sole discretion to consult with
the Company and to request the assistance of and rely upon the Company in
connection with the Trustee’s duties and obligations pursuant to the foregoing
clause (c) (including without limitation the calculation or determination of the
Securities Trading Price), and the Company agrees, if requested by the Trustee,
to cooperate with, and provide assistance to, the Trustee in carrying out its
duties under the foregoing clause (c); provided, however, that nothing herein
shall be construed to relieve the Trustee of its duties pursuant to the
foregoing clause (c).

 

In the case of the foregoing clauses (d)(i) and (ii), the Company shall
cause a notice of such issuance or distribution to be filed with the Trustee
and the Conversion Agent and to be mailed to each Holder of Securities at its
address appearing on the list provided for in Section 2.05, at least 20
days prior to the Ex-Dividend Date for such issuance or distribution.  Once the Company has given such notice,
Holders may surrender their Securities for conversion at any time thereafter
until the earlier of the close of business on the Business Day prior to the
Ex-Dividend Date or the Company’s announcement that such issuance or
distribution will not take place.  This
provision shall not apply if the Holder of a Security otherwise participates in
the distribution without conversion.

 

The “Ex-Dividend Date” for any such issuance or distribution
means the date immediately prior to the commencement of “ex-dividend” trading
for such issuance or distribution on The New York Stock Exchange or such other
national securities exchange or The Nasdaq Stock Market or similar system of
automated dissemination of quotations of securities prices on which the Common
Stock is then listed or quoted.

 

The number of shares of Common Stock issuable upon conversion of a
Security shall be determined by dividing the principal amount of the Security
or portion thereof surrendered for conversion by the Conversion Price in effect
on the Conversion Date.  The initial Conversion
Price is set forth in paragraph 8 of the Securities and is subject to
adjustment as provided in this Article 10.  If any Securities are properly presented for conversion, the
Company, at its option, instead of delivering the shares of Common Stock
issuable upon conversion of such Securities, may pay the Holder the Cash
Conversion Price.

 

49

 

A Holder may convert a portion of a Security equal to $1,000 or any
integral multiple thereof.  Provisions
of this Indenture that apply to conversion of all of a Security also apply to
conversion of a portion of a Security.

 

If a Security is called for redemption pursuant to Article 3, the
right to convert such Security shall terminate at the close of business on the
second Business Day before the redemption date for such Security (unless the
Company shall default in making the redemption payment then due, in which case
the conversion right shall terminate on the date such Default is cured and such
Security is redeemed).  A Security in
respect of which a Holder has delivered a Purchase Notice pursuant to
Section 3.08 or a Change in Control Purchase Notice pursuant to
Section 3.09 exercising the option of such Holder to require the Company
to repurchase such Security may be converted only if such Purchase Notice or
Change in Control Purchase Notice, as the case may be, is withdrawn by a
written notice of withdrawal delivered to the Paying Agent prior to the close
of business on the Purchase Date or prior to the close of business on the
Change in Control Purchase Date, as the case may be, in accordance with
Section 3.10.

 

A Holder of Securities is not entitled to any rights of a holder of
Common Stock until such Holder has converted its Securities into Common Stock
and, upon such conversion, only to the extent such Securities are deemed to
have been converted into Common Stock pursuant to this Article 10.

 

Section 10.02.  Conversion Procedure.  To convert a Security, a Holder must satisfy
the requirements in paragraph 8 of the Securities and (i) complete and manually
sign the conversion notice on the back of the Security and deliver such notice
to the Conversion Agent, (ii) surrender the Security to the Conversion Agent,
(iii) furnish appropriate endorsements and transfer documents if required by
the Registrar or the Conversion Agent, (iv) pay any transfer or other tax, if
required by Section 10.04 and (v) if the Security is held in book-entry
form, complete and deliver to the Depositary appropriate instructions pursuant
to the Depositary’s book-entry conversion programs.  The date on which the Holder satisfies all of the foregoing
requirements is the “Conversion Date”. 
As soon as practicable after the Conversion Date and in any event within
five Business Days, the Company shall deliver to the Holder through the
Conversion Agent either (i) a certificate for or (ii) a book-entry notation of
the number of whole shares of Common Stock issuable upon the conversion and
cash in lieu of any fractional shares pursuant to Section 10.05.

 

The Person in whose name the Security is registered shall be deemed to
be a stockholder of record on the Conversion Date; provided, however,
that no surrender of a Security on any date when the stock transfer books of
the Company shall be closed shall be effective to constitute the Person or
Persons entitled to receive the shares of Common Stock upon such conversion as
the record holder or holders of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the Person or Persons entitled to receive such shares
of Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open (subject to the provisions of the next paragraph of this
Section 10.02); provided, further, that such conversion shall be at the
Conversion Price in effect on the date that such Security shall have been

 

50

 

surrendered for conversion, as if the stock
transfer books of the Company had not been closed.  Upon conversion of a Security, such Person shall no longer be a
Holder of such Security.

 

If the Company elects to pay cash instead of issuing shares with regard
to a Security properly presented for conversion, the Company shall notify the
Holder and the Trustee of such election no later than the second Business Day
after the Conversion Date of the Security. 
If the Holder does not withdraw such election to convert, the Company
shall pay the Cash Conversion Price in respect of the Security converted in
cash not later than the tenth Business Day after the Conversion Date.

 

No payment or adjustment will be made for accrued interest (including
Contingent Interest or Liquidated Damages, if any), on a converted Security or
for dividends or distributions on shares of Common Stock issued upon conversion
of a Security (provided that the shares of Common Stock received upon
conversion of Securities shall continue to accrue Liquidated Damages, as
applicable, in accordance with the Registration Rights Agreement and shall be
entitled to receive, at the next interest payment date, any accrued but unpaid
Liquidated Damages with respect to the converted Securities), but if any Holder
surrenders a Security for conversion between the record date for the payment of
an installment of interest and the next interest payment date, then,
notwithstanding such conversion, the interest (including Contingent Interest or
Liquidated Damages, if any), payable on such interest payment date shall be
paid to the Holder of such Security on such interest payment date.  In such event, such Security, when
surrendered for conversion, must be accompanied by delivery of a check payable
to the Conversion Agent in an amount equal to the interest (including
Contingent Interest or Liquidated Damages, if any), payable on such interest
payment date on the portion so converted. 
If such payment does not accompany such Security, the Security shall not
be converted; provided, however, that no such check shall be required if such
Security has been called for redemption on a redemption date within the period
between and including such record date and such interest payment date, or if
such Security is surrendered for conversion on the interest payment date.  If the Company defaults in the payment of
interest (including Contingent Interest or Liquidated Damages, if any), payable
on the interest payment date, the Conversion Agent shall repay such funds to
the Holder.

 

No fractional shares of Common Stock shall be issued upon conversion of
Securities.  If more than one Security
shall be surrendered for conversion at one time by the same holder, the number
of full shares which shall be issuable upon conversion shall be computed on the
basis of the aggregate principal amount of the Securities (or specified
portions thereof to the extent permitted hereby) so surrendered.  If any fractional share of Common Stock
would be issuable upon the conversion of any Security or Securities, the
Company shall make a payment in lieu thereof in cash based on the current
market price of a share of Common Stock. 
For these purposes, the current market price of a share of Common Stock
shall be the Closing Price per share of Common Stock on the first Business Day
immediately preceding the day on which the Securities (or specified portions
thereof) are deemed to have been converted.

 

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

 

51

 

Section 10.03.  Adjustments Below Par
Value.  Before taking any action
which would cause an adjustment decreasing the Conversion Price so that the
shares of Common Stock issuable upon conversion of the Securities would be
issued for less than the par value of such Common Stock, the Company will take
all corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Conversion Price.

 

Section 10.04.  Taxes on Conversion.  If a Holder converts a Security, the Company
shall pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon such conversion.  However, the Holder shall pay any such tax which is due because
the Holder requests the shares to be issued in a name other than the Holder’s
name.  The Conversion Agent may refuse
to deliver the certificates representing the Common Stock being issued in a
name other than the Holder’s name until the Conversion Agent receives a sum
sufficient to pay any tax which will be due because the shares are to be issued
in a name other than the Holder’s name. 
Nothing herein shall preclude any tax withholding required by law or
regulations.

 

Section 10.05.  Company to Provide Stock.

 

The Company shall, prior to issuance of any Securities hereunder, and
from time to time as may be necessary, reserve, out of its authorized but
unissued Common Stock a sufficient number of shares of Common Stock to permit
the conversion of all outstanding Securities into shares of Common Stock.  The shares of Common Stock or other
securities issued upon conversion of Securities bearing a Legend as provided in
Section 2.06(f) shall bear a legend substantially in the following form:

 

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

 

THE HOLDER OF THIS SECURITY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A

 

52

 

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

 

The Company covenants that all shares of Common Stock delivered upon
conversion of the Securities shall be newly issued shares or treasury shares,
shall be duly authorized, validly issued, fully paid and non-assessable and
shall be free from preemptive rights and free of any lien or adverse claim.

 

The Company will endeavor promptly to comply with all federal and state
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Securities, if any, and will list or cause to have quoted such
shares of Common Stock on each national securities exchange or in the
over-the-counter market or such other market on which the Common Stock is then
listed or quoted.

 

Section 10.06.  Adjustment of Conversion Price.  The conversion price (the “Conversion
Price”) initially shall be that price set forth in paragraph 8 of the form
of Security attached hereto as Exhibit A-1, but shall be adjusted from
time to time by the Company as follows:

 

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

 

(b)           In case the Company
shall issue to all holders of its Common Stock, rights, warrants or options
entitling such holders (for a period commencing no earlier than the record date
described below and expiring not more than 60 days after such record date) to
subscribe for or purchase shares of Common Stock (or securities convertible
into Common

 

53

 

Stock) at a price per share
less than the Market Price at the record date for the determination of
stockholders entitled to receive such rights, warrants or options, the
Conversion Price in effect immediately prior thereto shall be adjusted so that
the Conversion Price shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding on such record date, plus the number of shares which the aggregate
subscription or purchase price for the total number of shares of Common Stock
offered by the rights, warrants or options so issued (or the aggregate
conversion price of the convertible securities offered by such rights, warrants
or options) would purchase at such Market Price, and the denominator of which
shall be the number of shares of Common Stock outstanding on such record date
plus the number of additional shares of Common Stock offered by such rights,
warrants or options (or into which the convertible securities so offered by
such rights, warrants or options are convertible).  Such adjustment shall be made successively whenever any such
rights, warrants or options are issued, and shall become effective immediately
after such record date.  If at the end
of the period during which such rights, warrants or options are exercisable not
all rights, warrants or options shall have been exercised, the adjusted
Conversion Price shall be immediately readjusted to what it would have been
upon application of the foregoing adjustment substituting the number of
additional shares of Common Stock actually issued (or the number of shares of
Common Stock issuable upon conversion of convertible securities actually
issued) for the total number of shares of Common Stock offered (or the
convertible securities offered).

 

(c)           In case the Company
shall distribute to all holders of its Common Stock any shares of Capital Stock
of the Company (other than Common Stock) or evidences of its indebtedness,
other securities or other assets, or shall distribute to all holders of its
Common Stock, rights, warrants or options to subscribe for or purchase any of its
securities (excluding (i) rights, options and warrants referred to in
Section 10.06(b) above; (ii) those dividends, distributions, subdivisions
and combinations referred to in Section 10.06(a) above; and (iii)
dividends and distributions paid in cash), then in each such case the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of such distribution by a fraction, the numerator of which shall be
the Market Price on the record date mentioned below less the fair market value
on such record date (as determined by the Board of Directors of the Company,
whose determination shall be conclusive evidence of such fair market value) of
the portion of the Capital Stock or evidences of indebtedness, securities or
assets so distributed or of such rights, warrants or options, in each case as
applicable, to one share of Common Stock, and the denominator of which shall be
the Market Price on such record date; provided that no adjustment to the
Conversion Price or the ability of a Holder of a Security to convert will be
made pursuant to this Section 10.06(c) if the Company provides that
Holders of Securities will participate in such cash dividend or distribution on
an as-converted basis without conversion and provided further, that if
the numerator of the foregoing fraction is less than $1.00 (including a
negative amount), then in lieu of the foregoing adjustment, adequate provision
shall be made so that each Holder shall have the right to receive upon
conversion, in addition to the Common Stock issuable upon such conversion, the
distribution such Holder would have received had such Holder converted its
Security immediately prior to the record date for such distribution.  Such adjustment shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such distribution.

 

54

 

(d)           In case a tender or
exchange offer made by the Company or any Subsidiary of the Company for all or
any portion of the Common Stock shall expire and such tender or exchange offer
(as amended as of the expiration thereof) shall require the payment to common
stockholders of consideration per share of Common Stock having a fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) that as of
the last time (the “Expiration Time”) tenders or exchanges may be made
pursuant to such tender or exchange offer (as it may be amended) exceeds the
Closing Price of a share of Common Stock on the Trading Day next succeeding the
Expiration Time, the Conversion Price shall be decreased so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the Expiration Time by a fraction,

 

(i)            the
numerator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the Closing Price of a share of Common Stock on the Trading Day next
succeeding the Expiration Time, and

 

(ii)           the
denominator of which shall be the sum of (x) the fair market value (determined
as aforesaid) of the aggregate consideration payable to stockholders based on
the acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted up to any such
maximum, being referred to as the “Purchased Shares”) and (y) the
product of the number of shares of Common Stock outstanding (less any Purchased
Shares) at the Expiration Time and the Closing Price of a share of Common Stock
on the Trading Day next succeeding the Expiration Time,

 

such adjustment to become
effective immediately prior to the opening of business on the day following the
Expiration Time.  If the Company is
obligated to purchase shares pursuant to any such tender or exchange offer, but
the Company is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price shall again
be adjusted to be the Conversion Price that would then be in effect if such
tender or exchange offer had not been made.

 

(e)           In case the Company
shall declare a cash dividend or distribution to all or substantially all of
the holders of Common Stock, the Conversion Price shall be decreased so that
the Conversion Price shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the record date for such
dividend or distribution by a fraction,

 

(i)            the
numerator of which shall be the average of the Closing Prices of the Common
Stock price for the three consecutive trading days ending on the date
immediately preceding the record date for such dividend or distribution (the “Pre-Dividend
Sale Price”), minus the full amount of such cash dividend or distribution
applicable to one share of Common Stock, and

 

(ii)           the
denominator of which shall be the Pre-Dividend Sale Price,

 

55

 

such adjustment to become
effective immediately after the record date for such dividend or distribution; provided
that no adjustment to the Conversion Price or the ability of a Holder of a
Security to convert will be made pursuant to this Section 10.06(e) if the
Company provides that Holders of Securities will participate in such cash
dividend or distribution on an as-converted basis without conversion and provided
further, that if the numerator of the foregoing fraction is less
than $1.00 (including a negative amount), then in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder shall have the
right to receive upon conversion, in addition to the Common Stock issuable upon
such conversion, the amount of cash such Holder would have received had such
Holder converted its Security immediately prior to the record date for such
dividend or distribution.  If such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price that would then be in effect if
such dividend or distribution had not been declared.

 

(f)                                    Reserved.

 

(g)                                 If
the rights provided for in the Company’s Rights Agreement dated as of
May 9, 1996 (the “Stockholder Rights Plan”) have separated from the
Company’s Common Stock in accordance with the provisions of the Stockholder
Rights Plan so that the Holders of the Securities would not be entitled to receive
any rights in respect of Common Stock issuable upon conversion of the
Securities, the Conversion Price will be adjusted as provided in paragraph (c)
above, subject to readjustment in the event of the expiration, termination or
redemption of the rights.  In lieu of
any such adjustment, the Company may amend the Stockholder Rights Plan to
provide that upon conversion of the Securities the Holders will receive, in
addition to Common Stock issuable upon such conversion, the rights which would
have attached to such shares of Common Stock if the rights had not become
separated from the Common Stock under the Company’s Stockholder Rights
Plan.  To the extent that the Company
adopts any future rights plan, upon conversion of the Securities into Common
Stock, Securityholders will receive, in addition to Common Stock, the rights
under the future rights plan whether or not the rights have separated from the
Common Stock at the time of conversion and no adjustment to the Conversion
Price will be made in connection with any distribution of rights thereunder.

 

(h)                                 In
case of a tender or exchange offer made by a Person other than the Company or
any Subsidiary for an amount that increases the offeror’s ownership of Common
Stock to more than twenty-five percent (25%) of the Common Stock outstanding
and shall involve the payment by such Person of consideration per share of
Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a resolution
of the Board of Directors) as of the Expiration Time tenders or exchanges may
be made pursuant to such tender or exchange offer (as it may be amended) that
exceeds the Closing Price of a share of Common Stock on the Trading Day next
succeeding the Expiration Time, and in which, as of the Expiration Time the
Board of Directors is not recommending rejection of the offer, the Conversion
Price shall be decreased so that the same shall equal the rate determined by
multiplying the Conversion Price in effect immediately prior to the Expiration
Time by a fraction,

 

(i)                                     the numerator of
which shall be the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) at the Expiration 

 

56

 

Time multiplied by the Closing Price of a share of Common Stock on the
Trading Day next succeeding the Expiration Time, and

 

(ii)                                  the denominator of
which shall be the sum of (x) the fair market value (determined as aforesaid)
of the aggregate consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the tender or exchange offer) of
al shares validly tendered or exchanged and not withdrawn as of the Expiration
Time (the shares so accepted up to any such maximum, being referred to as the
“Purchase Shares”) and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) at the Expiration Time and the Closing
Price of a share of Common Stock on the Trading Day next succeeding the
Expiration Time,

 

such adjustment to become
effective immediately prior to the opening of business on the day following the
Expiration Time.  If such Person is
obligated to purchase shares pursuant to any such tender or exchange offer, but
such Person is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price shall again
be adjusted to be the Conversion Price that would then be in effect if such
tender or exchange offer had not been made. 
Notwithstanding the foregoing, the adjustment described in this
Section 10.06(h) shall not be made if, as of the Expiration Time, the
offering documents with respect to such offer disclose a plan or intention to
cause the Company to engage in any transaction described in Article 5.

 

In any case in which this Section 10.06 shall require that an
adjustment be made immediately following a record date established for purposes
of Section 10.06, the Company may elect to defer (but only until five Business
Days following the filing by the Company with the Trustee of the certificate
described in Section 10.06) issuing to the holder of any Security
converted after such record date the shares of Common Stock and other Capital
Stock of the Company issuable upon such conversion over and above the shares of
Common Stock and
other Capital Stock of the Company issuable upon such conversion only on the
basis of the Conversion Price prior to adjustment; and, in lieu of the shares
the issuance of which is so deferred, the Company shall issue or cause its
transfer agents to issue due bills or other appropriate evidence of the right
to receive such shares.

 

Section 10.07.
 No
Adjustment.  No adjustment in the
Conversion Price shall be required unless the adjustment would require an
increase or decrease of at least 1% in the Conversion Price as last adjusted;
provided, however, that any adjustments which by reason of this
Section 10.07 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.  All calculations under this Article 10 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.

 

No adjustment need be made for a transaction referred to in
Section 10.06 if Holders are to participate in the transaction on a basis
and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction.  Such
participation by Holders may include 

 

57

 

participation upon conversion;
provided that an adjustment shall be made at such time as the Holders are no
longer entitled to participate.

 

No adjustment need be made for rights to purchase Common Stock or
issuances of Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.

 

No adjustment need be made for a change in the par value or a change to
no par value of the Common Stock.

 

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

 

Section 10.08.  Equivalent Adjustments.  If, as a result of an adjustment made
pursuant to Section 10.06 above, the holder of any Security thereafter
surrendered for conversion shall become entitled to receive any shares of
Capital Stock of the Company other than shares of its Common Stock, thereafter
the Conversion Price of such other shares so receivable upon conversion of any
Securities shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in this Article 10.

 

Section 10.09.  Adjustment
for Tax Purposes.  The Company shall
be entitled to make such reductions in the Conversion Price, in addition to
those required by Section 10.06, as it in its discretion shall determine
to be advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or a distribution or
securities convertible into or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.

 

Section 10.10.  Notice of Adjustment.  Whenever the Conversion Price is adjusted,
or Holders become entitled to other securities or due bills, the Company shall
promptly mail to Holders a notice of the adjustment and file with the Trustee
an Officers’ Certificate briefly stating the facts requiring the adjustment and
the manner of computing it.  The
certificate shall be conclusive evidence of the correctness of such adjustment
and the Trustee may conclusively assume that, unless and until such certificate
is received by it, no such adjustment is required.

 

Section 10.11.
 Notice of
Certain Transactions.  In case:

 

(a)                                  the
Company shall declare a dividend (or any other distribution) on its Common
Stock; or

 

(b)                                 the
Company shall authorize the granting to the holders of its Common Stock of
rights, warrants or options to subscribe for or purchase any share of any class
or any other rights, warrants or options; or

 

(c)                                  of
any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value),
or of any consolidation, merger, or 

 

58

 

share exchange to which the Company is a
party and for which approval of any stockholders of the Company is required, or
of the sale or transfer of all or substantially all of the assets of the
Company; or

 

(d)                                 of
the voluntary or involuntary dissolution, liquidation or winding-up of the
Company;

 

the Company shall cause to be
filed with the Trustee and the Conversion Agent and to be mailed to each Holder
of Securities at its address appearing on the list provided for in
Section 2.05, as promptly as possible but in any event at least ten days
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights, warrants or options, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights are to be determined, or (y)
the date on which such reclassification, consolidation, merger, share exchange,
sale, transfer, dissolution, liquidation or winding-up is expected to become
effective or occur, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding-up.  Failure to give such
notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
share exchange, transfer, dissolution, liquidation or winding-up.

 

Section 10.12.  Effect of
Reclassification, Consolidation, Merger, Share Exchange or Sale on Conversion
Privilege.

 

If any of the following shall occur, namely:  (i) any reclassification or change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination); (ii) any consolidation, combination, merger or share exchange to
which the Company is a party other than a merger in which the Company is the
continuing corporation and which does not result in any reclassification of, or
change (other than a change in name, or par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock; or (iii) any sale or
conveyance of all or substantially all of the assets of the Company, then the
Company, or such successor or purchasing corporation, as the case may be,
shall, as a condition precedent to such reclassification, change,
consolidation, merger, share exchange, sale or conveyance, execute and deliver
to the Trustee a supplemental indenture providing that the Holder of each
Security then outstanding shall have the right to convert such Security into
the kind and amount of shares of Capital Stock and other securities and
property (including cash) receivable upon such reclassification, change,
consolidation, merger, share exchange, sale or conveyance by a holder of the
number of shares of Common Stock deliverable upon conversion of such Security
immediately prior to such reclassification, change, consolidation, merger,
share exchange, sale or conveyance. 
Such supplemental indenture shall provide for adjustments of the Conversion
Price which shall be as nearly equivalent as may be practicable to the
adjustments of the Conversion Price provided for in this Article 10.  If, in the case of any such consolidation,
merger, share exchange, sale or conveyance, the stock or other securities and
property (including cash) receivable thereupon by a holder of 

 

59

 

Common Stock includes shares of
Capital Stock or other securities and property of a corporation other than the
successor or purchasing corporation, as the case may be, in such consolidation,
merger, share exchange, sale or conveyance, then such supplemental indenture
shall also be executed by such other corporation and shall contain such
additional provisions to protect the interests of the Holders of the Securities
as the Board of Directors of the Company shall reasonably consider necessary by
reason of the foregoing.  The provision
of this Section 10.12 shall similarly apply to successive consolidations,
mergers, share exchanges, sales or conveyances.  Notwithstanding the foregoing, a distribution by the Company to
all or substantially all holders of its Common Stock for which an adjustment to
the Conversion Price or provision for conversion of the Securities may be made
pursuant to Section 10.06 shall not be deemed to be a sale or conveyance
of all or substantially all of the assets of the Company for purposes of this
Section 10.12.

 

In the event the Company shall execute a supplemental indenture
pursuant to this Section 10.12, the Company shall promptly file with the
Trustee an Opinion of Counsel stating that such supplemental indenture is
authorized or permitted by this Indenture and an Officers’ Certificate briefly
stating the reasons therefor, the kind or amount of shares of stock or
securities or property (including cash) receivable by Holders of the Securities
upon the conversion of their Securities after any such reclassification,
change, consolidation, merger, share exchange, sale or conveyance, any
adjustment to be made with respect thereto and that all conditions precedent
have been complied with.

 

Section 10.13.  Trustee’s
Disclaimer.

 

The Trustee has no duty to determine when an adjustment under this
Article 10 should be made, how it should be made or what such adjustment
should be made, but may accept as conclusive evidence of the correctness of any
such adjustment, and shall be protected in relying upon, the Officers’
Certificate with respect thereto which the Company is obligated to file with
the Trustee pursuant to Section 10.10. 
The Trustee shall not be accountable for and makes no representation as
to the validity or value of any securities or assets issued upon conversion of
Securities, and the Trustee shall not be responsible for the Company’s failure
to comply with any provisions of this Article 10.  Each Conversion Agent (other than the Company
or an Affiliate of the Company) shall have the same protection under this
Section 10.13 as the Trustee.

 

The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 10.12, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers’
Certificate with respect thereto which the Company is obligated to file with
the Trustee pursuant to Section 10.12.

 

Section 10.14.  Voluntary
Reduction.

 

The Company from time to time may reduce the Conversion Price by any
amount for any period of time if the period is at least 20 Trading Days or such
longer period as may be required by law and if the reduction is irrevocable
during the period; provided that in no event may the Conversion Price be less
than the par value of a share of Common Stock.

 

60

 

Section 10.15.
 Simultaneous
Adjustments.

 

In the event that this Article 10 requires adjustments to the
Conversion Price under more than one of Sections 10.06(a) and (c), and the
record dates for the distributions giving rise to such adjustments shall occur
on the same date, then such adjustments shall be made by applying, first, the
provisions of Section 10.06(c), as applicable, and, second, the provisions
of Section 10.06(a).  If more than
one event requiring adjustment pursuant to Section 10.06 shall occur
before completing the determination of the Conversion Price for the first event
requiring such adjustment, then the Board of Directors (whose determination
shall, if made in good faith, be conclusive) shall make such adjustments to the
Conversion Price (and the calculation thereof) after giving effect to all such
events as shall preserve for Holders the Conversion Price protection provided
in Section 10.06.

 

ARTICLE 11

SUBORDINATION

 

Section 11.01.  Securities Subordinated to Senior
Indebtedness.

 

The Company covenants and agrees, and each Holder of the Securities, by
its acceptance thereof, likewise covenants and agrees, that all Securities
shall be issued subject to the provisions of this Article 11; and each
Person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the payment of all
Obligations on the Securities by the Company shall, to the extent and in the
manner herein set forth, be subordinated and junior in right of payment to the
prior payment in full in cash or Cash Equivalents of all Obligations on Senior
Indebtedness, including, without limitation, the Company’s Obligations under
the Credit Agreement; that the subordination is for the benefit of, and shall
be enforceable directly by, the holders of Senior Indebtedness or their
Representative, and that each holder of Senior Indebtedness or their
Representative whether now outstanding or hereafter created, incurred, assumed
or guaranteed shall be deemed to have acquired Senior Indebtedness in reliance
upon the covenants and provisions contained in this Indenture and the
Securities.

 

Section 11.02.  Payments to Holders.

 

No payment shall be made with respect to the Obligations on the
Securities (including, but not limited to, the Change in Control Purchase Price
with respect to the Securities subject to purchase in accordance with
Article 3 as provided in this Indenture), except payments and
distributions made by the Trustee as permitted by the first or second paragraph
of Section 11.05, if:

 

(i)                                     a default in the
Obligations due on any Designated Senior Indebtedness occurs and is continuing
(or, in the case of Designated Senior Indebtedness for which there is a period
of grace, in the event of such a default that continues beyond the period of grace,
if any, specified in the instrument or lease evidencing such Designated Senior
Indebtedness); or

 

(ii)                                  a default, other than
a payment default, on any Designated Senior Indebtedness occurs and is
continuing that then permits holders of such 

 

61

 

Designated Senior Indebtedness to accelerate its maturity and the
Trustee receives a notice of the default (a “Payment Blockage Notice”)
from a Representative or holder of Designated Senior Indebtedness or the Company.

 

Subject to the provisions of Section 11.05, if the Trustee
receives any Payment Blockage Notice pursuant to clause (ii) above, no
subsequent Payment Blockage Notice shall be effective for purposes of this
Section unless and until at least 365 consecutive days shall have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice and
all scheduled payments on the Securities that have come due have been paid in
full in cash.  No nonpayment default
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee (unless such default was waived, cured or otherwise
ceased to exist for a period of at least 60 consecutive days prior to the date
of such subsequent Payment Blockage Notice and thereafter subsequently
reoccurred) shall be, or be made, the basis for a subsequent Payment Blockage
Notice.

 

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

 

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

 

(b)  in the case of a default
referred to in clause (ii) above, upon the earlier of (1) the date on
which such default is cured or waived or ceases to exist or (2) 179 days after
the date on which the applicable Payment Blockage Notice is received, if the
maturity of such Designated Senior Indebtedness has not been accelerated,
unless this Article 11 otherwise prohibits the payment or distribution at
the time of such payment or distribution.

 

Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization
of the Company (whether voluntary or involuntary) or in bankruptcy, insolvency,
receivership or similar proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash, or other payments
satisfactory to the holders of Senior Indebtedness before any payment is made
on account of the principal of, premium, if any, or interest (including
Contingent Interest and Liquidated Damages, if any) on the Securities (except
payments made pursuant to Article 8 from monies deposited with the Trustee
pursuant thereto prior to commencement of proceedings for such dissolution,
winding-up, liquidation or reorganization); and upon any such dissolution or
winding-up or liquidation or reorganization of the Company or bankruptcy,
insolvency, receivership or other proceeding, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to which the Holders of the Securities or the
Trustee would be entitled, except for the provision of this Article 11,
shall (except as aforesaid) be paid by the Company or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other Person making such payment
or distribution, or by the Holders of the Securities or by the Trustee under
this Indenture if received by them or it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts
of Senior Indebtedness held by such holders, or as otherwise required by law or
a court order) or their Representative or 

 

62

 

Representatives, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full in cash, or other payment satisfactory to the holders of Senior
Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness, before any payment or distribution
is made to the Holders of the Securities or to the Trustee.

 

For purposes of this Article 11, 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 11 with respect to the Securities to the payment of all Senior
Indebtedness which may at the time be outstanding; provided  that
(i) the Senior Indebtedness is assumed by the new corporation, if any,
resulting from any reorganization or readjustment, and (ii) the rights of
the holders of Senior Indebtedness (other than leases which are not assumed by
the Company or the new corporation, as the case may be) are not, without the consent
of such holders, altered by such reorganization or readjustment.  The consolidation of the Company with, or
the merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance, transfer or lease of its
property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Article 5 shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 11.02 if such other corporation shall, as a part
of such consolidation, merger, conveyance, transfer or lease, comply with the
conditions stated in Article 5.

 

In the event of the acceleration of the Securities because of an Event
of Default, no payment or distribution shall be made to the Trustee or any
Holder of Securities in respect of the principal of, premium, if any, or
interest (including Contingent Interest and Liquidated Damages, if any) on the
Securities by the Company (including, but not limited to, the Change in Control
Purchase Price with respect to the Securities subject to purchase in accordance
with Article 3 as provided in this Indenture), except payments and
distributions made by the Trustee as permitted by Section 11.05, until all
Senior Indebtedness has been paid in full in cash or other payment satisfactory
to the holders of Senior Indebtedness or such acceleration is rescinded in
accordance with the terms of this Indenture. 
If payment of the Securities is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Indebtedness of such
acceleration.

 

In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (including, without limitation, by way
of setoff or otherwise), prohibited by the foregoing, shall be received by the
Trustee or the Holders of the Securities before all Senior Indebtedness is paid
in full, in cash or other payment satisfactory to the holders of Senior
Indebtedness, or provision is made for such payment thereof in accordance with
its terms in cash or other payment satisfactory to the holders of Senior
Indebtedness, such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered to the holders of Senior
Indebtedness or their Representative or Representatives, as their respective
interests may appear, as calculated by the Company, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full, in cash or other 

 

63

 

payment satisfactory to the
holders of Senior Indebtedness, after giving effect to any concurrent payment
or distribution to or for the holders of such Senior Indebtedness.

 

Nothing in this Section 11.02 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.  This Section 11.02 shall be subject to
the further provisions of Section 11.05.

 

Section 11.03.  Subrogation of Securities.

 

Subject to the payment in full, in cash or other payment satisfactory
to the holders of Senior Indebtedness, of all Senior Indebtedness, the rights
of the Holders of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article 11 (equally and ratably with
the holders of all Indebtedness of the Company which by its express terms is subordinated
to other indebtedness of the Company to substantially the same extent as the
Securities are subordinated and is entitled to like rights of subrogation) to
the rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Indebtedness until the Obligations on the Securities shall be paid in
full in cash or other payment satisfactory to the holders of the Securities;
and, for the purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article 11, and no payment over pursuant to the
provisions of this Article 11, to or for the benefit of the holders of
Senior Indebtedness by Holders of the Securities or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness,
and the Holders of the Securities, be deemed to be a payment by the Company to
or on account of the Senior Indebtedness; and no payments or distributions of
cash, property or securities to or for the benefit of the Holders of the
Securities pursuant to the subrogation provisions of this Article 11,
which would otherwise have been paid to the holders of Senior Indebtedness
shall, as between the Company and its creditors other than Holders of the
Securities, be deemed to be a payment by the Company to, or for, the account of
the Securities.  It is understood that
the provisions of this Article 11 are and are intended solely for the
purposes of defining the relative rights of the Holders of the Securities, on
the one hand, and the holders of the Senior Indebtedness, on the other hand.

 

Nothing contained in this Article 11 or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Company, its creditors other than the holders of Senior Indebtedness, and the
Holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the Obligations on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities and creditors of the Company other than the holders
of the Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article 11 of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.

 

64

 

Upon any payment or distribution of assets of the Company referred to
in this Article 11, the Trustee, and the Holders of the Securities shall
be entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Securities, for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon and all
other facts pertinent thereto or to this Article 11.

 

Section 11.04.  Authorization to Effect Subordination.

 

Each Holder of a Security by the Holder’s acceptance thereof authorizes
and directs the Trustee on the Holder’s behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 11 and appoints the Trustee to act as the Holder’s
attorney-in-fact for any and all such purposes.  If the Trustee does not file a proper proof of claim or proof of
debt in the form required in any proceeding referred to in Section 11.03
hereof at least 30 days before the expiration of the time to file such claim,
the holders of any Senior Indebtedness or their representatives are hereby authorized
to file an appropriate claim for and on behalf of the Holders of the
Securities.

 

Section 11.05.  Notice to Trustee.

 

The Company shall give prompt written notice in the form of an
Officers’ Certificate to a Responsible Officer of the Trustee and to any Paying
Agent of any fact known to the Company which would prohibit the making of any
payment of monies to or by the Trustee or any Paying Agent in respect of the
Securities pursuant to the provisions of this Article 11.  Notwithstanding the provisions of this
Article 11 or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts which would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article 11, unless and until
a Responsible Officer of the Trustee shall have received written notice thereof
at the Corporate Trust Office from the Company (in the form of an Officers’
Certificate) or a Representative or a Holder or Holders of Senior Indebtedness
or from any trustee thereof; and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 7.01, shall be entitled
in all respects to assume that no such facts exist; provided  that
if on a date not less than three Business Days prior to the date upon which by
the terms hereof any such monies may become payable for any purpose (including,
without limitation, the payment of the principal of, or premium, if any, or
interest (including Contingent Interest and Liquidated Damages, if any) on any
Security) the Trustee shall not have received, with respect to such monies, the
notice provided for in this Section 11.05, then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such monies and to apply the same to the purpose for which
they were received, and shall not be affected by any notice to the contrary
which may be received by it on or after such prior date.  Notwithstanding anything in this
Article 11 to the contrary, nothing shall prevent any payment by the
Trustee to the Holders of monies deposited with it pursuant to Article 8,
and any such payment shall not be subject to the provisions of Article 11.

 

65

 

The Trustee, subject to the provisions of Section 7.01, shall be
entitled to rely on the delivery to it of a written notice by a Representative
or a Person representing himself to be a holder of Senior Indebtedness (or a trustee
on behalf of such holder) to establish that such notice has been given by a
Representative or a holder of Senior Indebtedness or a trustee on behalf of any
such holder or holders.  In the event
that the Trustee determines in good faith that further evidence is required
with respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article 11,
the Trustee may request such Person to furnish evidence to the reasonable satisfaction
of the Trustee as to the amount of Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article 11, 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 11.06.  Trustee’s Relation to Senior Indebtedness.

 

The Trustee in its individual capacity shall be entitled to all of the
rights set forth in this Article 11 in respect of any Senior Indebtedness
at any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in Section 7.11 or elsewhere in this Indenture
shall deprive the Trustee of any of its rights as such holder.

 

With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 11, and no implied covenants
or obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. 
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness and, the Trustee shall not be liable to any holder of
Senior Indebtedness or any Representative if it shall pay over or deliver to
Holders of Securities, the Company or any other Person money or assets to which
any holder of Senior Indebtedness or such Representative shall be entitled by
virtue of this Article 11 or otherwise.

 

Section 11.07.
 No
Impairment of Subordination.

 

No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have
or otherwise be charged with.

 

Section 11.08.  Certain Conversions Deemed Payment.

 

For the purposes of this Article 11 only, (1) the issuance
and delivery of junior securities upon conversion of Securities in accordance
with Article 10 shall not be deemed to constitute a payment or
distribution on account of the principal of (or premium, if any) or interest
(including Contingent Interest and Liquidated Damages, if any) on Securities or
on account of the purchase or other acquisition of Securities, and (2) the
payment, issuance or delivery of cash 

 

66

 

(except in satisfaction of
fractional shares pursuant to Section 10.02), property or securities
(other than junior securities) upon conversion of a Security shall be deemed to
constitute payment on account of the principal of such Security.  For the purposes of this Section 11.08,
the term “junior securities” means (a) shares of any stock of any class of
the Company, or (b) securities of the Company which are subordinated in
right of payment to all Senior Indebtedness which may be outstanding at the
time of issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Securities are so subordinated as
provided in this Article.  Nothing
contained in this Article 11 or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Indebtedness and the Holders, the right, which is
absolute and unconditional, of the Holder of any Security to convert such
Security in accordance with Article 10.

 

Section 11.09.  Article Applicable to Paying Agents.

 

If at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term “Trustee” as
used in this Article shall (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within its meaning as
fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; provided, however,
that the first paragraph of Section 11.05 shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.

 

Section 11.10.
 Senior
Indebtedness Entitled to Rely.

 

The holders of Senior Indebtedness (including, without limitation,
Designated Senior Indebtedness) shall have the right to rely upon this Article 11,
and no amendment or modification of the provisions contained herein shall
diminish the rights of such holders unless such holders shall have agreed in
writing thereto.

 

ARTICLE 12

MISCELLANEOUS

 

Section 12.01.  Trust Indenture Act Controls.

 

If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.

 

Section 12.02.  Notices.

 

Any request, demand, authorization, notice, waiver, consent or
communication shall be in writing and delivered in person or mailed by
first-class mail, postage prepaid, addressed as follows, or transmitted by
facsimile transmission (confirmed orally) to the following facsimile numbers:

 

67

 

if to the Company, to:

 

Griffon Corporation

100 Jericho Quadrangle

Jericho, New York  11753
Attention:
Secretary

Facsimile No.:  (516) 822-4824

 

if to the Trustee, to:

 

American Stock Transfer & Trust Company

59 Maiden Lane

New York, NY 10038

Attn: Corporate Trust Department
Facsimile No.:
(718) 331-1852

 

The Company or the Trustee by notice given to the other in the manner
provided above may designate additional or different addresses for subsequent
notices or communications.

 

Any notice or communication given to a Holder shall be mailed to the
Holder, by first-class mail, postage prepaid, at the Holder’s address as it
appears on the registration books of the Registrar and shall be sufficiently
given if so mailed within the time prescribed.

 

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

 

If the Company mails a notice or communication to the Holders, it shall
mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent
or co-registrar.

 

Section 12.03.  Communication by Holders with Other
Holders.

 

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

 

Section 12.04.  Certificate and Opinion as to Conditions
Precedent.

 

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

 

(a)                                  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

 

68

 

(b)                                 an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.

 

In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such eligible and qualified Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.

 

Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or opinion is
based are erroneous.  Any such
certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating the information on which counsel is
relying unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

 

Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

 

Section 12.05.  Statements Required in Certificate or
Opinion.

 

Each Officers’ Certificate or Opinion of Counsel with respect to
compliance with a covenant or condition provided for in this Indenture shall
include:

 

(a)                                  a
statement that each person making such Officers’ Certificate or Opinion of
Counsel has read such covenant or condition;

 

(b)                                 a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such Officers’ Certificate
or Opinion of Counsel are based;

 

(c)                                  a
statement that, in the opinion of each such person, he has made such
examination or investigation as is necessary to enable such person to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and

 

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

 

69

 

Section 12.06.  Separability Clause.

 

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

 

Section 12.07.  Rules by Trustee, Paying Agent,
Conversion Agent and Registrar.

 

The Trustee may make reasonable rules for action by or a meeting of
Holders.  The Registrar, the Conversion
Agent and the Paying Agent may make reasonable rules for their functions.

 

Section 12.08.  Legal Holidays.

 

A “Legal Holiday” is any day other than a Business Day.  If any specified date (including a date for
giving notice) is a Legal Holiday, the action shall be taken on the next
succeeding day that is not a Legal Holiday, and, if the action to be taken on
such date is a payment in respect of the Securities, no interest (including
Contingent Interest or Liquidated Damages, if any), shall accrue for the
intervening period.

 

Section 12.09.
 Governing
Law.

 

THIS INDENTURE AND EACH NOTE SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 12.10.  No Recourse Against Others.

 

A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or for any claim based on, in respect of or by reason of such
obligations or their creation.  By
accepting a Security, each Securityholder shall waive and release all such
liability.  The waiver and release shall
be part of the consideration for the issue of the Securities.

 

Section 12.11.  Successors.

 

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

 

Section 12.12.  Multiple Originals.

 

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.

 

70

 

IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of the
date first above written.

 

 

	
   

  	
  GRIFFON
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Edward I. Kramer

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Edward
  I. Kramer

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President, Administration and

  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN
  STOCK TRANSFER & TRUST

  COMPANY, as Trustee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Herbert J. Lemmer

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Herbert
  J. Lemmer

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
					

 

71

 

EXHIBIT A-1

 

{FORM OF FACE OF GLOBAL SECURITY}

 

[INCLUDE THE FOLLOWING LEGEND ON RESTRICTED SECURITIES:

 

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM.  EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.  THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (III) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY SUBSEQUENT PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.

 

THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON
SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE.]

 

THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED STATES
FEDERAL INCOME TAX PURPOSES.  FOR
PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE ISSUE
PRICE OF EACH SECURITY IS $1,000 PER $1,000 OF PRINCIPAL AMOUNT, THE ISSUE DATE
IS JULY 18, 2003 AND THE COMPARABLE YIELD IS 8.50% PER ANNUM.  HOLDERS OF THIS SECURITY MAY OBTAIN
INFORMATION REGARDING THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, YIELD TO MATURITY
AND THE PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY BY SUBMITTING A WRITTEN
REQUEST FOR SUCH INFORMATION TO: 
GRIFFON CORPORATION, 100 JERICHO QUADRANGLE, JERICHO, NEW YORK  11753, ATTN.: SECRETARY, SUCH INFORMATION TO BE MADE AVAILABLE, BEGINNING NO
LATER THAN 10 DAYS AFTER THE ISSUE DATE, PROMPTLY UPON REQUEST.

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO GRIFFON CORPORATION (THE “COMPANY”) OR ITS
AGENT FOR REGISTRATION OF 

 

A-1-1

 

TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO
NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

A-1-2

 

GRIFFON CORPORATION

 

4.0%
Contingent Convertible Subordinated Notes Due 2023

 

	
  No.:

  	
   

  	
  CUSIP:

  
	
   

  	
   

  	
   

  
	
  Issue
  Date:

  	
   

  	
  Principal
  Amount:

  

 

GRIFFON CORPORATION, a Delaware corporation, promises to pay to Cede
& Co. or registered assigns, the principal amount as set forth on
Schedule I hereto, on July 18, 2023, subject to the further
provisions of this Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at this
place.  This Security is convertible as
specified on the other side of this Security.

 

Interest Payment Dates: 
January 18 and July 18, commencing January 18, 2004.

 

Record Dates:  January 1
and July 1, commencing January 1, 2004.

 

 

	
  Dated:

  	
  GRIFFON CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-1-3

 

TRUSTEE’S CERTIFICATE OF
AUTHENTICATION

 

American Stock Transfer &
Trust Company, as Trustee, certifies that this is one of the Securities
referred to in the within-mentioned Indenture.

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  
	
   

  	
   

  
	
  Dated:

  

 

A-1-4

 

{FORM OF REVERSE SIDE OF NOTE}

GRIFFON CORPORATION

4.0%
Contingent Convertible Subordinated Notes Due 2023

 

(1)                                  Interest.

 

This Security shall accrue interest at an initial rate of 4.0% per annum.  The Company promises to pay interest on the
Securities in cash semiannually on each January 18 and July 18,
commencing January 18, 2004, to Holders of record on the immediately
preceding January 1 and July 1, respectively.  Interest on the Securities will accrue from
the most recent date to which interest has been paid, or if no interest has
been paid, from the Issue Date, until the principal amount is paid or duly made
available for payment.  The Company will
pay interest on any overdue principal amount at the interest rate borne by the
Securities at the time such interest on the overdue principal amount accrues,
compounded semiannually, and it shall pay interest on overdue installments of
interest and Liquidated Damages, if any (without regard to any applicable grace
period), at the same interest rate, compounded semiannually.  Interest (including Contingent Interest and
Liquidated Damages, if any) on the Securities will be computed on the basis of
a 360-day year comprised of twelve 30-day months.

 

The Company shall pay additional interest (“Contingent Interest”)
to the Holders during any six-month period (a “Contingent Interest Period”)
from July 18 to,
but excluding, January 18 and
from January 18 to, but
excluding, July 18, with the initial six-month period commencing
July 18, 2010, if the
average of the Security Trading Price for the five Trading Days ending on the
third Trading Day immediately preceding the first day of the applicable
Contingent Interest Period (the “Contingent Interest Average Trading Price”)
equals $1,200 or more.  The amount of
Contingent Interest payable per $1,000 principal amount of Securities in
respect of any Contingent Interest Period shall equal 0.50% per annum on the
Contingent Interest Average Trading Price. 
The Company will pay Contingent Interest, if any, in the same manner as
it will pay interest as described above.

 

Upon determination that Holders will be entitled to receive Contingent
Interest for a Contingent Interest Period, on or prior to the first day of such
Contingent Interest Period, the Company shall issue a press release.

 

(2)                                  Method of Payment.

 

The Company will pay interest (including Contingent Interest and
Liquidated Damages, if any), on this Security to the Person who is the
registered Holder of this Security at the close of business on January 1
or July 1, as the case may be, immediately preceding the related interest
payment date.  Subject to the terms and
conditions of the Indenture, the Company will make payments in respect of the
Redemption Price, Purchase Price, Change in Control Purchase Price and the
principal amount at Stated Maturity, as the case may be, to the Holder who
surrenders a Security to a Paying Agent to collect such payments in respect of
the Security.  The Company will pay cash
amounts in money of the United States that at the time of payment is legal
tender for payment of public and private debts.  However, the Company may pay interest 

 

A-1-5

 

(including Contingent Interest
and Liquidated Damages, if any), the Redemption Price, Purchase Price, Change
in Control Purchase Price and the principal amount at Stated Maturity, as the
case may be, by check or wire payable in such money; provided, however,
that a Holder holding Securities with an aggregate principal amount in excess
of $1,000,000 may request payment by wire transfer in immediately available
funds to an account in North America at the election of such Holder.  The Company may mail an interest check to
the Holder’s registered address.  Notwithstanding
the foregoing, so long as this Security is registered in the name of a
Depositary or its nominee, all payments hereon shall be made by wire transfer
of immediately available funds to the account of the Depositary or its nominee.

 

(3)                                  Paying Agent,
Conversion Agent and Registrar.

 

Initially, American Stock Transfer & Trust Company (the “Trustee”)
will act as Paying Agent, Conversion Agent and Registrar.  The Company may appoint and change any
Paying Agent, Conversion Agent or Registrar without notice, other than notice
to the Trustee; provided that the Company will maintain at least one Paying
Agent having an office or agency in the State of New York, City of New York,
Borough of Manhattan, which shall initially be an office or agency of the Trustee.  The Company or any of its Subsidiaries or
any of their Affiliates may act as Paying Agent, Conversion Agent or Registrar.

 

(4)                                  Indenture.

 

The Company issued the Securities under an Indenture dated as of
July 18, 2003 (the “Indenture”), between the Company and the
Trustee.  The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as in effect from time to time
(the “TIA”).  Capitalized terms
used herein and not defined herein have the meanings ascribed thereto in the
Indenture.  The Securities are subject
to all such terms, and Holders are referred to the Indenture and the TIA for a
statement of those terms.

 

The Securities are general unsecured obligations of the Company limited
to up to $150,000,000 aggregate principal amount (which shall include the
Initial Purchasers’ option to purchase $25,000,000 of additional
Securities).  The Indenture does not
limit other indebtedness of the Company, secured or unsecured.

 

(5)                                  Redemption at the
Option of the Company.

 

No sinking fund is provided for the Securities.  Beginning on July 26, 2010 and during the periods
thereafter to maturity, the Securities are redeemable as a whole, or from time
to time in part, in any integral multiple of $1,000, at any time at the option
of the Company at a Redemption Price equal to 100% of the principal amount,
together with accrued but unpaid interest, thereon (including Contingent
Interest and Liquidated Damages, if any), up to but not including the
Redemption Date; provided that, if the Redemption Date is on or after an
interest record date but on or prior to the related interest payment date,
interest will be payable to the Holders in whose names the Securities are
registered at the close of business on the relevant record date.

 

A-1-6

 

(6)                                  Purchase By the
Company at the Option of the Holder; Purchase at the Option of the Holder Upon
a Change in Control.

 

Subject to the terms and conditions of the Indenture, the Company shall
become obligated to purchase, at the option of the Holder, all or any portion
of the Securities held by such Holder, in any integral multiple of $1,000, on
July 18, 2010,
July 18, 2013 and July 18, 2018 (each, a “Purchase Date”) at a purchase price per Security equal
to 100% of the aggregate principal amount of the Security (the “Purchase
Price”), together with accrued but unpaid interest (including Contingent
Interest and Liquidated Damages, if any), thereon, up to but not including the
Purchase Date upon delivery of a Purchase Notice containing the information set
forth in the Indenture, together with the Securities subject thereto, at any
time from the opening of business on the date that is 30 Business Days prior to
such Purchase Date until the close of business on the Business Day prior to
such Purchase Date, and upon delivery of the Securities to the Paying Agent by
the Holder as set forth in the Indenture.

 

At the option of the Holder and subject to the terms and conditions of
the Indenture, the Company shall become obligated to purchase the Securities
held by such Holder after the occurrence of a Change in Control of the Company
for a Change in Control Purchase Price equal to 100% of the principal amount
thereof plus accrued but unpaid interest (including Contingent Interest and
Liquidated Damages, if any), thereon, up to but not including the Change in
Control Purchase Date which Change in Control Purchase Price shall be paid in
cash  (provided that, if the Change in Control
Purchase Date is on or after an interest record date but on or prior to the
related interest payment date, accrued but unpaid interest will be payable to
the Holders in whose names the Securities are registered at the close of
business on the relevant record date).  Holders
have the right to withdraw any Purchase Notice or Change in Control Purchase
Notice, as the case may be, by delivering to the Paying Agent a written notice
of withdrawal in accordance with the provisions of the Indenture.

 

If cash sufficient to pay the Purchase Price or Change in Control
Purchase Price, as the case may be, and accrued but unpaid interest (including
Contingent Interest and Liquidated Damages, if any), on all Securities or
portions thereof to be purchased as of the Purchase Date or the Change in
Control Purchase Date, as the case may be, is deposited with the Paying Agent
on the Business Day prior to the Purchase Date or the Change in Control
Purchase Date, interest (including Contingent Interest and Liquidated Damages,
if any), shall cease to accrue on such Securities (or portions thereof) as of
such Purchase Date or Change in Control Purchase Date, and the Holder thereof
shall have no other rights as such other than the right to receive the Purchase
Price or Change in Control Purchase Price, as the case may be, and interest
(including Contingent Interest and Liquidated Damages, if any), upon surrender
of such Security.

 

(7)                                  Notice of
Redemption.

 

Notice of redemption pursuant to paragraph 5 of this Security will be
mailed at least 30 days but not more than 60 days before the Redemption Date to
each Holder of Securities to be redeemed at the Holder’s registered
address.  If money sufficient to pay the
Redemption Price of all Securities (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent prior to or on the
Redemption Date, immediately after such Redemption 

 

A-1-7

 

Date, interest (including
Contingent Interest and Liquidated Damages, if any) cease to accrue on such
Securities or portions thereof. 
Securities in denominations larger than $1,000 of principal amount may
be redeemed in part but only in integral multiples of $1,000 of principal
amount.

 

(8)                                  Conversion.

 

Subject to the provisions of Article 10 of the Indenture, a Holder
of a Security may convert such Security into shares of Common Stock of the
Company if any of the conditions specified in paragraphs (a) through (e) of
Section 10.01 of the Indenture is satisfied; provided, however,
that if such Security is called for redemption, the conversion right will
terminate at the close of business on the second Business Day immediately
preceding the Redemption Date of such Security (unless the Company shall
default in making the redemption payment when due, in which case the conversion
right shall terminate at the close of business on the date such Default is
cured and such Security is redeemed). 
The initial conversion price is $24.13 per share, subject to adjustment
under certain circumstances as described in the Indenture (the “Conversion
Price”).  The number of shares
issuable upon conversion of a Security is determined by dividing the principal
amount of Securities converted by the Conversion Price in effect on the
Conversion Date. In the event of a conversion of a Security, the Company has
the option to deliver the Cash Conversion Price to the Holder of the Security
surrendered for such conversion as provided in Section 10.02 of the
Indenture.  Upon conversion, no
adjustment for interest (including Contingent Interest and Liquidated Damages,
if any), or dividends will be made.  No
fractional shares will be issued upon conversion; in lieu thereof, an amount
will be paid in cash based upon the current market price (as defined in the
Indenture) of the Common Stock on the last Trading Day prior to the date of
conversion.

 

To convert a Security, a Holder must (a) complete and sign the
conversion notice set forth below and deliver such notice to the Conversion
Agent, (b) surrender the Security to the Conversion Agent, (c) furnish
appropriate endorsements and transfer documents if required by the Registrar or
the Conversion Agent, (d) pay any transfer or similar tax, if required and (e)
if the Security is held in book-entry form, complete and deliver to the
Depositary appropriate instructions pursuant to the Depositary’s book-entry
conversion programs.  If a Holder
surrenders a Security for conversion between the record date for the payment of
an installment of interest and the related interest payment date, the Security
must be accompanied by payment of an amount equal to the interest (including
Contingent Interest and Liquidated Damages, if any), payable on such interest
payment date on the principal amount of the Security or portion thereof then
converted; provided, however, that no such payment shall be
required if such Security has been called for redemption on a Redemption Date
within the period between and including such record date and such interest
payment date, or if such Security is surrendered for conversion on the interest
payment date.  A Holder may convert a
portion of a Security equal to $1,000 or any integral multiple thereof.

 

A Security in respect of which a Holder has delivered a Purchase Notice
or a Change of Control Purchase Notice exercising the option of such Holder to
require the Company to repurchase such Security as provided in
Section 3.08 or Section 3.09, respectively, of the Indenture may be
converted only if such notice of exercise is withdrawn in accordance with the
terms of the Indenture.

 

A-1-8

 

(9)                                  Denominations;
Transfer; Exchange.

 

The Securities are in fully registered form, without coupons, in
denominations of $1,000 of principal amount and integral multiples of
$1,000.  A Holder may transfer or
exchange Securities in accordance with the Indenture.  The Registrar may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture.  The
Registrar need not transfer or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities in respect of which a Purchase
Notice or a Change in Control Purchase Notice has been given and not withdrawn
(except, in the case of a Security to be purchased in part, the portion of the
Security not to be purchased) or any Securities for a period of 15 days before the
mailing of a notice of redemption of Securities to be redeemed.

 

(10)                            Persons Deemed Owners.

 

The registered Holder of this Security may be treated as the owner of
this Security for all purposes.

 

(11)                            Unclaimed Money or
Securities.

 

The Trustee and the Paying Agent shall return to the Company upon
written request any money or securities held by them for the payment of any
amount with respect to the Securities that remains unclaimed for two years,
subject to applicable unclaimed property law. 
After return to the Company, Holders entitled to the money or securities
must look to the Company, for payment as general creditors unless an applicable
abandoned property law designates another person.

 

(12)                            Amendment; Waiver.

 

Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
at the time outstanding and (ii) certain Defaults may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding. 
Subject to certain exceptions set forth in the Indenture, without the
consent of any Securityholder, the Company and the Trustee may amend the
Indenture or the Securities (i) to cure any ambiguity, omission, defect or
inconsistency, or make any other change that does not adversely affect the
rights of any Holder, (ii) to comply with Article 5 or Section 10.12
of the Indenture, (iii) to make provisions with respect to the conversion right
of Holders pursuant to the requirements of Section 10.12 and
Section 10.01 of the Indenture, (iv) to evidence and provide for the
acceptance of appointment under the Indenture by a successor Trustee, or (v) to
comply with the provisions of the TIA or any requirement of the SEC in
connection with the qualification of the Indenture under the TIA.

 

A-1-9

 

(13)                            Defaults and Remedies.

 

Except as set forth in the Indenture, if an Event of Default occurs and
is continuing, the Trustee or the Holders of not less than 25% in principal
amount of Securities then outstanding may declare all the Securities to be due
and payable in the manner, at the time and with the effect provided in the
Indenture.  Holders of Securities may
not enforce the Indenture or the Securities except as provided in the
Indenture.  The Trustee is not obligated
to enforce the Indenture or the Securities unless it has received indemnity
reasonably satisfactory to it.  The
Indenture permits, subject to certain limitations therein provided, Holders of
a majority in aggregate principal amount of the Securities then outstanding to
direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders of
Securities notice of any continuing Default or Event of Default (except a
Default in payment of principal, premium, if any, or interest when due, for any
reason, or a Default in compliance with Article 5 of the Indenture) if it
determines in good faith that withholding notice is in the interest of Holders.

 

(14)                            Trustee Dealings with
the Company.

 

Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.

 

(15)                            No Recourse Against
Others.

 

A director, officer, employee or shareholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. 
By accepting a Security, each Securityholder waives and releases all
such liability.  The waiver and release
are part of the consideration for the issue of the Securities.

 

(16)                            Ranking.

 

The Securities shall be direct, unsecured subordinated obligations of
the Company and shall and be subject to the provisions regarding subordination
contained in Article 11 of the Indenture. 
The Securities are not guaranteed.

 

(17)                            Subordination.

 

The Securities are subordinated in right of payment, in the manner and
to the extent set forth in the Indenture, to the prior payment in full in cash
or Cash Equivalents of all Obligations on Senior Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed.  Each
Holder by its acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on its behalf, to take such
action as may be necessary or appropriate to effectuate the subordination
provided for in the Indenture and appoints the Trustee its attorney-in-fact for
such purposes.

 

A-1-10

 

(18)                            Authentication.

 

This Security shall not be valid until an authorized signatory of the
Trustee manually signs the Trustee’s Certificate of Authentication on the other
side of this Security.

 

(19)                            Abbreviations.

 

Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (“Tenants In Common”), TEN ENT (“Tenants By
The Entireties”), JT TEN (“Joint Tenants With Right Of Survivorship And Not
As Tenants In Common”), CUST (“Custodian”) and U/G/M/A (“Uniform
Gift To Minors Act”).

 

(20)                            Governing Law.

 

THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY.

 

(21)                            CUSIP Numbers.

 

Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities.  No representation is made as to the accuracy
of such numbers as printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.

 

A-1-11

 

	
  ASSIGNMENT FORM

  	
   

  	
  CONVERSION NOTICE

  
	
   

  	
   

  	
   

  
	
  To
  assign this Security, fill in the form below

  	
   

  	
  To
  convert this Security into Common Stock of the Company, check the box  o

  
	
   

  	
   

  	
   

  
	
  I
  or we assign and transfer this Security to

  	
   

  	
  To
  convert only part of this Security, state the principal amount to be
  converted (which must be $1,000 or an integral multiple of $1,000):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  and
  irrevocably appoint
                          
  agent to transfer this Security on the books of the Company.  The agent may substitute another to act
  for him.

  	
   

  	
  (Insert
  the other person’s soc.  sec.  tax ID no.)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Your
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Sign
  exactly as your name appears on the other side of this Security)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Participant in a Recognized Signature 

  Guarantee Medallion Program

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signatory

  	
   

  	
   

  
							

 

A-1-12

 

FORM OF PURCHASE
NOTICE

 

To:  Griffon Corporation

 

The undersigned registered holder of this Security requests and
instructs the Company to purchase this Security, or the portion hereof (which
is $1,000 principal amount or a multiple thereof) designated below, on the
July 18 specified below, in accordance with the terms and conditions specified
in paragraph 6 of this Security and the Indenture referred to in this Security
and directs that the check in payment for this Security or the portion thereof
and any Securities representing the portion of principal amount hereof not to
be so purchased, be issued and delivered to the registered holder hereof unless
a different name has been indicated below. 
If any portion of this Security not purchased is to be issued in the
name of a Person other than the undersigned, the undersigned shall pay all
transfer taxes payable with respect thereto.

 

	
  Dated:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature(s)

  
	
   

  	
   

  
	
  Fill in for registration of
  Securities

  not purchased if to be issued other

  than to and in the name of registered holder:

  
	
   

  
	
   

  
	
  (Name)

  
	
   

  
	
   

  
	
  (Street Address)

  
	
   

  
	
   

  
	
  (City, state and zip code)

  
	
   

  
	
  Please print name and
  address

  
	
   

  
	
  principal amount to be
  purchased (if less than all): 
  $   ,000

  
	
   

  
	
  date of requested purchase: 
  July 18, 20   

  
	
   

  	
  (specify either July 18, 2010, 2013 or 2018)

  
				

 

A-1-13

 

FORM OF OPTION TO
ELECT REPURCHASE UPON A CHANGE IN CONTROL

 

To:  Griffon Corporation

 

The
undersigned registered holder of this Security hereby acknowledges receipt of a
notice from Griffon Corporation (the “Company”) as to the occurrence of a
Change In Control with respect to the Company and requests and instructs the
Company to repurchase this Security, or the portion hereof (which is $1,000
principal amount or a multiple thereof) designated below, in accordance with
the terms of the Indenture referred to in this Security and directs that the
check in payment for this Security or the portion thereof and any Securities
representing any unrepurchased principal amount hereof, be issued and delivered
to the registered holder hereof unless a different name has been indicated
below. If any portion of this Security not repurchased is to be issued in the
name of a Person other than the undersigned, the undersigned shall pay all
transfer taxes payable with respect thereto.

 

	
  Dated:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature(s)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Fill in for registration of
  Securities not

  repurchased if to be issued other than

  to and in the name of registered holder:

  
	
   

  
	
   

  	
   

  
	
  (Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Street Address)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (City, state and zip code)

  	
   

  
	
   

  	
   

  
	
  Please print name and
  address

  	
   

  
	
   

  
	
  principal amount to be
  purchased (if less than all): 
  $    ,000

  

 

A-1-14

 

SCHEDULE I

 

GRIFFON CORPORATION
4.0%
Contingent Convertible Subordinated Notes Due 2023

 

	
  Date

  	
   

  	
  Principal
  Amount

  	
   

  	
  Notation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-1-15

 

EXHIBIT
A-2

 

{Form of Certificated Security}

 

[INCLUDE THE FOLLOWING LEGEND ON RESTRICTED SECURITIES:

 

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM.  EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.  THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (III) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (III) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.

 

THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON
SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE.

 

THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S.  FEDERAL INCOME TAX PURPOSES.  FOR PURPOSES OF SECTIONS 1273 AND 1275 OF
THE INTERNAL REVENUE CODE, THE ISSUE PRICE OF EACH SECURITY IS $1,000 PER
$1,000 OF PRINCIPAL AMOUNT, THE ISSUE DATE IS JULY 18, 2003 AND THE
COMPARABLE YIELD IS 8.50%
PER ANNUM.  HOLDERS OF THIS SECURITY
MAY OBTAIN INFORMATION REGARDING THE AMOUNT OF ORIGINAL ISSUE DISCOUNT,
YIELD TO MATURITY AND THE PROJECTED PAYMENT SCHEDULE FOR THIS SECURITY BY
SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO:  GRIFFON CORPORATION, 100 JERICHO QUADRANGLE, JERICHO, NEW YORK  11753, ATTN.: SECRETARY, SUCH INFORMATION TO BE MADE AVAILABLE, BEGINNING NO
LATER THAN 10 DAYS AFTER THE ISSUE DATE, PROMPTLY UPON REQUEST.

 

A-2-1

 

GRIFFON CORPORATION

 

4.0%
Contingent Convertible Subordinated Notes Due 2023

 

	
  No.:

  	
   

  	
  CUSIP:

  
	
   

  	
   

  	
   

  
	
  Issue
  Date:

  	
   

  	
  Principal
  Amount:

  

 

GRIFFON CORPORATION, a Delaware corporation,
promises to pay
to                                                                      or
registered assigns, the principal amount
of                                            ,
on July 18,
2023, subject to the further provisions of this Security set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place. 
This Security is convertible as specified on the other side of this
Security.

 

Interest Payment Dates: 
January 18 and July 18, commencing January 18, 2004

 

Record Dates:  January 1
and July 1, commencing January 1, 2004

 

 

	
  Dated:

  	
  GRIFFON CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-2-2

 

TRUSTEE’S CERTIFICATE OF
AUTHENTICATION

 

American Stock Transfer &
Trust Company, as Trustee, certifies that this is one of the Securities
referred to in the within-mentioned Indenture.

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  
	
   

  	
   

  
	
  Dated:

  

 

A-2-3

 

{FORM OF REVERSE SIDE IS IDENTICAL TO EXHIBIT A-1}

 

A-2-4

 

EXHIBIT B

 

Transfer Certificate

 

In connection with any transfer of any of the Securities within the
period prior to the expiration of the holding period applicable to the sales
thereof under Rule 144(k) under the Securities Act of 1933, as amended (the “Securities
Act”) (or any successor provision), the undersigned registered owner of
this Security hereby certifies with respect to
$                 
principal amount of the above-captioned Securities presented or surrendered on
the date hereof (the “Surrendered Securities”) for registration of
transfer, or for exchange or conversion where the securities deliverable upon such
exchange or conversion are to be registered in a name other than that of the
undersigned registered owner (each such transaction being a “transfer”), that
such transfer complies with the restrictive legend set forth on the face of the
Surrendered Securities for the reason checked below:

 

o                                    A
transfer of the Surrendered Securities is made to the Company or any
subsidiaries; or

 

o                                    The
transfer of the Surrendered Securities complies with Rule 144A under the
U.S.  Securities Act of 1933, as amended
(the “Securities Act”); or

 

o                                    The
transfer of the Surrendered Securities is pursuant to an effective registration
statement under the Securities Act; or

 

o                                    The
transfer of the Surrendered Securities is pursuant to another available
exemption from the registration requirement of the Securities Act.

 

The
undersigned confirms that, to the undersigned’s knowledge, such Securities are
not being transferred to an “affiliate” of the Company as defined in Rule 144
under the Securities Act (an “Affiliate”).

 

 

	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Signature(s)

  
	
   

  	
   

  	
   

  
	
  (If the registered owner is a corporation,
  partnership or fiduciary, the title of the Person signing on behalf of such
  registered owner must be stated.)

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Participant in a Recognized Signature

  	
   

  	
   

  
	
  Guarantee Medallion Program

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Authorized Signatory

  	
   

  	
   

  
						

 

B-1

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