Document:

exv4w1

 

EXECUTION COPY

Exhibit 4.1

CAPITALSOURCE INC.,

as Issuer

TO

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

CAPITALSOURCE HOLDINGS LLC,

as Guarantor

CAPITALSOURCE FINANCE LLC,

as Guarantor

INDENTURE

Dated as of

July 7, 2004

3.5% Senior Convertible Debentures due 2034

 

 

CROSS-REFERENCE TABLE*

	 	 	 	 	 	 	 	 	 
	Trust Indenture Act Section
	 	Indenture Section

	§310
	 	(a)	 	(1)	 	 	7.09	 
	 
	 	(a)	 	(2)	 	 	7.09	 
	 
	 	(a)	 	(3)	 	 	N.A.	 
	 
	 	(a)	 	(4)	 	 	N.A.	 
	 
	 	(a)	 	(5)	 	 	N.A.	 
	 
	 	(b)	 	 	 	 	7.08	 
	 
	 	(c)	 	 	 	 	N.A.	 
	§311
	 	(a)	 	 	 	 	7.13	 
	 
	 	(b)	 	 	 	 	7.13	 
	 
	 	(c)	 	 	 	 	N.A.	 
	§312
	 	(a)	 	 	 	 	5.01; 5.02	 
	 
	 	(b)	 	 	 	 	N.A.	 
	 
	 	(c)	 	 	 	 	N.A.	 
	§313
	 	(a)	 	 	 	 	5.03	 
	 
	 	(b)	 	 	 	 	N.A.	 
	 
	 	(c)	 	 	 	 	5.03	 
	 
	 	(d)	 	 	 	 	5.03	 
	§314
	 	(a)	 	 	 	 	5.04	 
	 
	 	(b)	 	 	 	 	N.A.	 
	 
	 	(c)	 	(1)	 	 	17.05	 
	 
	 	(c)	 	(2)	 	 	17.05	 
	 
	 	(c)	 	(3)	 	 	N.A.	 
	 
	 	(d)	 	 	 	 	N.A.	 
	 
	 	(e)	 	 	 	 	16.05	 
	 
	 	(f)	 	 	 	 	N.A.	 
	§315
	 	(a)	 	 	 	 	7.01; 7.02	 
	 
	 	(b)	 	 	 	 	6.08	 
	 
	 	(c)	 	 	 	 	6.06	 
	 
	 	(d)	 	 	 	 	7.01; 7.06	 
	 
	 	(e)	 	 	 	 	6.09	 
	§316
	 	(a)	 	(1)	 	 	6.07	 
	 
	 	(a)	 	(2)	 	 	10.02	 
	 
	 	(b)	 	 	 	 	N.A.	 
	 
	 	(c)	 	 	 	 	8.01	 
	§317
	 	(a)	 	(1)	 	 	6.02	 
	 
	 	(a)	 	(2)	 	 	7.02	 
	 
	 	(b)	 	 	 	 	4.04	 
	§318
	 	(a)	 	 	 	 	17.08	 

N.A. means not applicable.

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

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	PAGE

	Article 1 Definitions
	 	 	2	 
	Section 1.01 Definitions.
	 	 	2	 
	Article 2 Issue, Description, Execution, Registration and Exchange of Debentures
	 	 	11	 
	Section 2.01 Designation Amount and Issue of Debentures.
	 	 	11	 
	Section 2.02 Form of Debentures.
	 	 	11	 
	Section 2.03 Date and Denomination of Debentures; Payments of Interest.
	 	 	12	 
	Section 2.04 Execution of Debentures.
	 	 	14	 
	Section 2.05 Exchange and Registration of Transfer of Debentures;
Restrictions on Transfer.
	 	 	14	 
	Section 2.06 Mutilated, Destroyed, Lost or Stolen Debentures.
	 	 	21	 
	Section 2.07 Temporary Debentures.
	 	 	22	 
	Section 2.08 Cancellation of Debentures.
	 	 	22	 
	Section 2.09 CUSIP Numbers.
	 	 	23	 
	Section 2.10 Ranking.
	 	 	23	 
	Article 3 Redemption and Repurchase of Debentures
	 	 	23	 
	Section 3.01 Company’s Right to Redeem.
	 	 	23	 
	Section 3.02 Notice of Optional Redemption; Selection of Debentures.
	 	 	24	 
	Section 3.03 Payment of Debentures Called for Redemption by the Company.
	 	 	25	 
	Section 3.04 Conversion Arrangement on Call for Redemption.
	 	 	26	 
	Section 3.05 Repurchase of Debentures by the Company at Option of Holders
upon a Fundamental Change.
	 	 	27	 
	Section 3.06 Repurchase of Debentures by the Company at Option of Holders
on Specified Dates.
	 	 	31	 
	Section 3.07 [Reserved].
	 	 	33	 
	Section 3.08 Conditions and Procedures for Repurchase at Option of
Holders.
	 	 	33	 
	Article 4 Particular Covenants of the Company and the Guarantors
	 	 	36	 
	Section 4.01 Payment of Principal and Interest.
	 	 	36	 
	Section 4.02 Maintenance of Office or Agency.
	 	 	36	 
	Section 4.03 Appointments to Fill Vacancies in Trustee’s Office.
	 	 	37	 
	Section 4.04 Provisions as to Paying Agent.
	 	 	37	 
	Section 4.05 Existence.
	 	 	38	 
	Section 4.06 Rule 144A Information Requirement.
	 	 	38	 
	Section 4.07 Stay, Extension and Usury Laws.
	 	 	38	 
	Section 4.08 Compliance Certificate.
	 	 	39	 
	Section 4.09 Additional Amounts Notice.
	 	 	39	 
	Section 4.10 Contingent Debt Tax Treatment.
	 	 	39	 
	Section 4.11 Calculation of Original Issue Discount.
	 	 	40	 
	Article 5 Debentureholders’ Lists and Reports by the Company and the Trustee
	 	 	40	 
	Section 5.01 Debentureholders’ Lists.
	 	 	40	 
	Section 5.02 Preservation and Disclosure of Lists.
	 	 	40	 
	Section 5.03 Reports by Trustee.
	 	 	41	 
	Section 5.04 Reports by Company.
	 	 	41	 

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	 	 	PAGE

	Article 6 Remedies of the Trustee and Debentureholders on an Event of Default
	 	 	41	 
	Section 6.01 Events of Default.
	 	 	41	 
	Section 6.02 Payments of Debentures on Default; Suit Therefor.
	 	 	44	 
	Section 6.03 Application of Monies Collected by Trustee.
	 	 	45	 
	Section 6.04 Proceedings by Debentureholder.
	 	 	46	 
	Section 6.05 Proceedings by Trustee.
	 	 	47	 
	Section 6.06 Remedies Cumulative and Continuing.
	 	 	47	 
	Section 6.07 Direction of Proceedings and Waiver of Defaults by Majority
of Debentureholders.
	 	 	47	 
	Section 6.08 Notice of Defaults.
	 	 	48	 
	Section 6.09 Undertaking to Pay Costs.
	 	 	48	 
	Article 7 The Trustee
	 	 	49	 
	Section 7.01 Duties and Responsibilities of Trustee.
	 	 	49	 
	Section 7.02 Reliance on Documents, Opinions, Etc.
	 	 	50	 
	Section 7.03 No Responsibility for Recitals, Etc.
	 	 	51	 
	Section 7.04 Trustee, Paying Agents, Bid Solicitation Agents, Conversion
Agents or Registrar May Own Debentures.
	 	 	52	 
	Section 7.05 Monies to Be Held in Trust.
	 	 	52	 
	Section 7.06 Compensation and Expenses of Trustee.
	 	 	52	 
	Section 7.07 Officers’ Certificate as Evidence.
	 	 	53	 
	Section 7.08 Conflicting Interests of Trustee.
	 	 	53	 
	Section 7.09 Eligibility of Trustee.
	 	 	53	 
	Section 7.10 Resignation or Removal of Trustee.
	 	 	53	 
	Section 7.11 Acceptance by Successor Trustee.
	 	 	54	 
	Section 7.12 Succession by Merger.
	 	 	55	 
	Section 7.13 Preferential Collection of Claims.
	 	 	56	 
	Article 8 The Debentureholders
	 	 	56	 
	Section 8.01 Action by Debentureholders.
	 	 	56	 
	Section 8.02 Proof of Execution by Debentureholders.
	 	 	56	 
	Section 8.03 Who Are Deemed Absolute Owners.
	 	 	56	 
	Section 8.04 Company-owned Debentures Disregarded.
	 	 	57	 
	Section 8.05 Revocation of Consents, Future Holders Bound.
	 	 	57	 
	Article 9 Meetings of Debentureholders
	 	 	58	 
	Section 9.01 Purpose of Meetings.
	 	 	58	 
	Section 9.02 Call of Meetings by Trustee.
	 	 	58	 
	Section 9.03 Call of Meetings by Company or Debentureholders.
	 	 	58	 
	Section 9.04 Qualifications for Voting.
	 	 	59	 
	Section 9.05 Regulations.
	 	 	59	 
	Section 9.06 Voting.
	 	 	59	 
	Section 9.07 No Delay of Rights by Meeting.
	 	 	60	 
	Article 10 Supplemental Indentures
	 	 	60	 
	Section 10.01 Supplemental Indentures Without Consent of
Debentureholders.
	 	 	60	 
	Section 10.02 Supplemental Indenture with Consent of Debentureholders.
	 	 	61	 
	Section 10.03 Effect of Supplemental Indenture.
	 	 	62	 
	Section 10.04 Notation on Debentures.
	 	 	63	 

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	 	 	PAGE

	Section 10.05 Evidence of Compliance of Supplemental Indenture to Be
Furnished to Trustee.
	 	 	63	 
	Article 11 Consolidation, Merger, Sale, Conveyance and Lease
	 	 	63	 
	Section 11.01 Company or Guarantor May Consolidate on Certain Terms.
	 	 	63	 
	Section 11.02 Successor to Be Substituted.
	 	 	64	 
	Section 11.03 Opinion of Counsel to Be Given Trustee.
	 	 	64	 
	Article 12 Satisfaction and Discharge of Indenture
	 	 	65	 
	Section 12.01 Discharge of Indenture.
	 	 	65	 
	Section 12.02 Paying Agent to Repay Monies Held.
	 	 	65	 
	Section 12.03 Return of Unclaimed Monies.
	 	 	65	 
	Article 13 Immunity of Incorporators, Shareholders, Members, Officers and
Directors
	 	 	66	 
	Section 13.01 Indenture, Debentures and Guarantees Solely Corporate or
Limited Liability Company Obligations, as the Case may be.
	 	 	66	 
	Article 14 Conversion of Debentures
	 	 	66	 
	Section 14.01 Right to Convert.
	 	 	66	 
	Section 14.02 Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends.
	 	 	69	 
	Section 14.03 Payment Upon Conversion; Payment of Cash in Lieu of Common
Stock.
	 	 	71	 
	Section 14.04 Fractional Shares.
	 	 	72	 
	Section 14.05 Conversion Rate.
	 	 	72	 
	Section 14.06 Adjustment of Conversion Rate.
	 	 	72	 
	Section 14.07 Effect of Reclassification, Consolidation, Merger or Sale.
	 	 	79	 
	Section 14.08 Taxes on Shares Issued.
	 	 	80	 
	Section 14.09 Reservation of Shares, Shares to Be Fully Paid; Compliance
with Governmental Requirements; Listing of Common Stock.
	 	 	80	 
	Section 14.10 Responsibility of Trustee.
	 	 	80	 
	Section 14.11 Notice to Holders Prior to Certain Actions.
	 	 	81	 
	Section 14.12 Shareholders.
	 	 	82	 
	Article 15 Guarantees
	 	 	82	 
	Section 15.01 Guarantees.
	 	 	82	 
	Section 15.02 Execution and Delivery of Guarantees.
	 	 	84	 
	Section 15.03 Release of Guarantees.
	 	 	84	 
	Article 16 Contingent Interest
	 	 	85	 
	Section 16.01 Contingent Interest
	 	 	85	 
	Section 16.02 Payment of Contingent Interest
	 	 	85	 
	Section 16.03 Contingent Interest Notification.
	 	 	85	 
	Article 17 Miscellaneous Provisions
	 	 	86	 
	Section 17.01 Provisions Binding On Company’s and Guarantors’ Successors.

	 	 	86	 
	Section 17.02 Official Acts By Successor Corporation.
	 	 	86	 
	Section 17.03 Addresses For Notices, Etc.
	 	 	86	 
	Section 17.04 Notice to Holders.
	 	 	86	 
	Section 17.05 Governing Law.
	 	 	87	 
	Section 17.06 Evidence of Compliance with Conditions Precedent,
Certificates to Trustee.
	 	 	87	 
	Section 17.07 Legal Holidays.
	 	 	87	 

iii

 

	 	 	 	 	 
	 	 	PAGE

	Section 17.08 Company Responsible for Making Calculations.
	 	 	87	 
	Section 17.09 Trust Indenture Act.
	 	 	88	 
	Section 17.10 No Security Interest Created.
	 	 	88	 
	Section 17.11 Benefits of Indenture.
	 	 	88	 
	Section 17.12 Table of Contents, Headings, Etc.
	 	 	88	 
	Section 17.13 Authenticating Agent.
	 	 	88	 
	Section 17.14 Execution in Counterparts.
	 	 	89	 
	Section 17.15 Severability.
	 	 	89	 
	Exhibit A Form of Debenture
	 	 	A-1	 

iv

 

INDENTURE

     INDENTURE dated as of July 7, 2004 by and among CapitalSource Inc., a
Delaware corporation (hereinafter called the “Company”), as issuer,
CapitalSource Holdings LLC, a Delaware limited liability company (hereinafter
called “Holdings”), CapitalSource Finance LLC, a Delaware limited liability
company (hereinafter called “Finance”), each having its principal office at
4445 Willard Avenue, 12th Floor, Chevy Chase, Maryland 20815 (Holdings and
Finance are hereinafter each called a “Guarantor”, and collectively called the
"Guarantors”), and U.S. Bank National Association, as trustee hereunder
(hereinafter called the “Trustee”).

     WITNESSETH:

     WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 3.5% Senior Convertible Debentures due 2034
(hereinafter called the “Debentures”), in an aggregate principal amount not to
exceed $330,000,000, and, to provide the terms and conditions upon which the
Debentures are to be authenticated, issued and delivered, the Company and each
Guarantor have duly authorized the execution and delivery of this Indenture;
and

     WHEREAS, each Guarantor has agreed to provide for the guarantee of the
Debentures; and

     WHEREAS, the Debentures, the related guarantees, the certificate of
authentication to be borne by the Debentures, a form of assignment, a form of
fundamental change repurchase election, a form of Company repurchase election
and a form of conversion notice to be borne by the Debentures are to be
substantially in the forms hereinafter provided for; and

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

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

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

 

 

Article 1

Definitions

Section 1.01 Definitions. The terms defined in this Section 1.01 (except as
herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.01. All other
terms used in this Indenture that are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in the Trust Indenture Act and in the
Securities Act as in force at the date of the execution of this Indenture. The
words “herein”, “hereof”, “hereunder” and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as
the singular.

     “98% Trading Exception” has the meaning specified in Section
14.01(a)(iii).

     “Additional Amounts” has the meaning specified for “Additional Amounts” in
Section 2(e) of the Registration Rights Agreement.

     “Additional Amounts Notice” has the meaning specified in Section 4.09.

     “Adjustment Event” has the meaning specified in Section 14.06(m).

     “Agent Members” has the meaning specified in Section 2.05(b).

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

     “beneficial holder” shall be determined in accordance with Rules 13d-3 and
13d-5 promulgated by the Commission under the Exchange Act, or any successor
provision thereto, except that a Person shall be deemed to have “beneficial
ownership” of all shares that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.

     “Bid Solicitation Agent” means such Person (other than any Affiliate of
the Company) as the Company may designate as Bid Solicitation Agent from time
to time, and shall initially mean the Trustee.

     “Board of Directors” means either the Board of Directors of the Company,
or a committee of such Board duly authorized to act for it hereunder.

2

 

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

     “Business Day” means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New
York.

     “Capital Stock” of any Person means any and all shares (including ordinary
shares or American Depositary Shares), interests, participations or other
equivalents, however designated of corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person and any rights (other than debt securities convertible or
exchangeable into an equity interest), warrants or options to acquire an equity
interest in such Person.

     “Cash Settlement Averaging Period” has the meaning specified in Section
14.03.

     “Cash Settlement Notice Period” has the meaning specified in Section
14.03.

     “Commission” means the Securities and Exchange Commission, as from time to
time constituted under the Exchange Act, or, if at any time after the execution
of this Indenture such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.

     “Common Stock” means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the
provisions of Section 14.07, however, shares issuable on conversion of
Debentures shall include only shares of the class designated as common stock of
the Company at the date of this Indenture (namely, the Common Stock, par value
$0.01 per share) or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and which are
not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable on conversion shall be substantially in the proportion which the
total number of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting from all such
reclassifications. Following the event of a merger, consolidation or other
similar transaction involving the Company that is otherwise permitted hereunder
in which the Company is not the surviving corporation, “Common Stock” will
include the common stock, common equity interests, ordinary shares or
depositary shares or other certificates representing common equity interests of
such surviving corporation or its direct or indirect parent corporation.

3

 

     “Company” means the corporation named as the “Company” in the first
paragraph of this Indenture, and, subject to the provisions of Article 11 and
Section 14.07, shall include its successors and assigns.

     “Company Repurchase Date” has the meaning specified in Section 3.06.

     “Company Repurchase Election” has the meaning specified in Section
3.06(b).

     “Company Repurchase Notice” has the meaning specified in Section 3.06(a).

     “Company Repurchase Price” has the meaning specified in Section 3.06.

     “Contingent Interest” has the meaning specified in Section 16.01.

     “Conversion Agent” means the Trustee or such other office or agency
designated by the Company where Debentures may be presented for conversion.

     “Conversion Date” has the meaning specified in Section 14.02.

     “Conversion Obligation” has the meaning specified in Section 14.03.

     “Conversion Price” as of any day means $1,000 divided by the Conversion
Rate as of such date and rounded to the nearest cent. The Conversion Price
shall initially be approximately $31.78 per share of Common Stock.

     “Conversion Settlement Distribution” has the meaning specified in Section
14.03.

     “Conversion Rate” has the meaning specified in Section 14.05.

     “Conversion Retraction Period” has the meaning specified in Section 14.03.

     “Corporate Trust Office” or other similar term, means the designated
office of the Trustee at which at any particular time its corporate trust
business as it relates to this Indenture shall be principally administered,
which office is, at the date as of which this Indenture is dated, located at 60
Livingston Ave, St. Paul, MN, 55107-2292, Attn: Corporate Trust Dept., or at
any other address as the Trustee may designate from time to time by notice to
the holders.

     “Custodian” means U.S. Bank National Association, as custodian with
respect to the Debentures in global form, or any successor entity thereto.

     “Debenture” or “Debentures” means any Debenture or Debentures, as the case
may be, authenticated and delivered under this Indenture, including any Global
Debenture.

     “Debenture Register” has the meaning specified in Section 2.05.

     “Debenture Registrar” has the meaning specified in Section 2.05.

4

 

     “Debentureholder” or “holder” as applied to any Debenture, or other
similar terms (but excluding the term “beneficial holder”), means any Person in
whose name at the time a particular Debenture is registered on the Debenture
Registrar’s books.

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

     “Defaulted Interest” has the meaning specified in Section 2.03.

     “Depositary” means the clearing agency registered under the Exchange Act
that is designated to act as the Depositary for the Global Debentures. The
Depository Trust Company shall be the initial Depositary, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, “Depositary” shall mean or include such
successor.

     “Determination Date” has the meaning specified in Section 14.06(m).

     “Event of Default” means any event specified in Section 6.01 as an Event
of Default.

     “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.

     “Ex-Dividend Date” means, with respect to any issuance or distribution on
shares of Common Stock, the first date upon which a sale of the Common Stock
does not automatically transfer the right to receive such issuance or
distribution from the seller of the Common Stock to the buyer.

     “Expiration Time” has the meaning specified in Section 14.06(e).

     “Final Notice Date” has the meaning specified in Section 14.03.

     “Fundamental Change” means the occurrence of any of the following:

     (a) a “person” or “group” within the meaning of Section 13(d) of the
Exchange Act other than the Company, its subsidiaries or its or their employee
benefit plans, files a Schedule TO or any other schedule, form or report under
the Exchange Act disclosing that such person or group has become the direct or
indirect ultimate “beneficial owner,” as defined in Rule 13d-3 under the
Exchange Act, of more than 50% of the total voting power of all shares of the
Company’s Capital Stock that are entitled to vote generally in the election of
directors;

     (b) consummation of any share exchange, consolidation or merger of the
Company or any sale, lease or other transfer in one transaction or a series of
transactions of all or substantially all of the consolidated assets of the
Company and its subsidiaries, taken as a whole, to any person other than the
Company or one or more of its subsidiaries pursuant to which the Common Stock
will be converted into cash, securities or other property; provided, however,
that a transaction where the holders of the Company’s

5

 

voting Capital Stock immediately prior to such transaction have, directly
or indirectly, more than 50% of the aggregate voting power of all shares of
Capital Stock of the continuing or surviving corporation or transferee entitled
to vote generally in the election of directors immediately after such event
shall not be a Fundamental Change; or

     (c) any transaction or event resulting in a Termination of Trading.

     A Fundamental Change will not be deemed to have occurred in respect of any
of the foregoing, however, if either:

     (i) the Last Reported Sale Price of the Common Stock for any five (5)
Trading Days within the ten (10) consecutive Trading Days ending immediately
before the later of the Fundamental Change or the public announcement thereof,
equals or exceeds 105% of the Conversion Price of the Debentures immediately
before the Fundamental Change or the public announcement thereof, or

     (ii) at least 90% of the consideration, excluding cash payments for
fractional shares, in the transaction or transactions constituting the
Fundamental Change consists of shares of Capital Stock traded on a national
securities exchange or quoted on the National Association of Securities Dealers
Automated Quotation System or which will be so traded or quoted when issued or
exchanged in connection with a Fundamental Change (these securities being
referred to as “publicly traded securities”) and as a result of this
transaction or transactions the Debentures become convertible into such
publicly traded securities, excluding cash payments for fractional shares.

     “Fundamental Change Company Notice” has the meaning specified in Section
3.05(b).

     “Fundamental Change Repurchase Date” has the meaning specified in Section
3.05.

     “Fundamental Change Repurchase Notice” has the meaning specified in
Section 3.05(c)(i).

     “Fundamental Change Repurchase Price” has the meaning provided in Section
3.05.

     “Global Debenture” has the meaning specified in Section 2.02.

     “Guarantee” means any of the unconditional and unsubordinated guarantees
by the Guarantors of the due and punctual payment of principal of and Interest
on the Debentures and certain other obligations of the Company pursuant to this
Indenture when and as the same shall become due and payable, whether at the
stated maturity, by acceleration, call for redemption, upon a Repurchase Date
or otherwise in accordance with the terms of the Debentures and this Indenture.

     “Guarantor” means either of the Persons named as such in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable

6

 

provisions of this Indenture, and thereafter, “Guarantor” shall mean such
successor Person.

     “holder” or “Debentureholder” as applied to any Debenture, or other
similar terms (but excluding the term “beneficial holder”), means any Person in
whose name at the time a particular Debenture is registered on the Debenture
Registrar’s books.

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

     “Indenture Obligations” has the meaning specified in Section 15.01.

     “Initial Purchasers” means each of Citigroup Global Markets Inc., Goldman,
Sachs & Co., J.P. Morgan Securities Inc. and Wachovia Capital Markets, LLC
(each, an “Initial Purchaser”).

     “Interest” means, when used with reference to the Debentures, interest
payable under the terms of the Debentures, including Contingent Interest, if
any, and Additional Amounts, if any, payable under the terms of the
Registration Rights Agreement.

     “Interest Payment Date” means January 15 and July 15 of each year,
commencing January 15, 2005.

     “Interest Period” means July 15 to January 14 and January 15 to July 14.

     “Last Reported Sale Price” of the Common Stock on any date means the
closing sale price per share (or if no closing sale price is reported, the
average of the bid and asked prices or, if more than one in either case, the
average of the average bid and the average asked prices) on that date as
reported in composite transactions for the New York Stock Exchange, or such
other principal U.S. national or regional securities exchange on which the
Common Stock is traded, or if the Common Stock is not listed on a U.S. national
or regional securities exchange, as reported by the National Association of
Securities Dealers Automated Quotation System, determined in each case without
reference to after-hours or extended market trading. If the Common Stock is
not listed for trading on a U.S. national or regional securities exchange and
not reported by the National Association of Securities Dealers Automated
Quotation System on the relevant date, the Last Reported Sale Price will be the
last quoted bid price for the Common Stock in the over-the-counter market on
the relevant date as reported by the National Quotation Bureau Incorporated or
similar organization. If the Common Stock is not so quoted, the Last Reported
Sale Price will be the price determined in good faith by the Board of Directors
of the Company.

     “Member Action” means a copy of one or more resolutions, certified by the
Secretary or an Assistant Secretary of a Guarantor to have been duly adopted by
or consented to by such Guarantor’s member (or members (if at any time a
Guarantor has more than a single member)) and to be in full force and effect on
the date of such certification, delivered to the Trustee.

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     “non-electing share” has the meaning specified in Section 14.07.

     “Officers’ Certificate” means a certificate signed in the name of the
Company or any Guarantor, as the case may be, by any two of the Chief Executive
Officer, the Chief Operating Officer, the President, the Chief Financial
Officer, Chief Credit Officer, Chief Legal Officer, Managing Director, Chief
Accounting Officer, any Vice President (whether or not designated by a number
or numbers or word or words added before or after the title “Vice President”),
the Treasurer, the Secretary, or the Controller of the Company or any
Guarantor; provided that the Officers’ Certificate delivered on the date hereof
pursuant to Section 17.06 may be signed by any one of the foregoing.

     “Opinion of Counsel” means an opinion in writing signed by legal counsel,
who may be an employee of or counsel to the Company or the Guarantors, as
applicable, or other counsel reasonably acceptable to the Trustee.

     “Outstanding”, when used with reference to Debentures and subject to the
provisions of Section 8.04, means, as of any particular time, all Debentures
authenticated and delivered by the Trustee under this Indenture, except:

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

     (b) Debentures, or portions thereof, (i) for the redemption of which
monies in the necessary amount shall have been deposited in trust with the
Trustee or with any Paying Agent (other than the Company) or (ii) which shall
have been otherwise defeased in accordance with Article 12;

     (c) Debentures in lieu of which, or in substitution for which, other
Debentures shall have been authenticated and delivered pursuant to the terms of
Section 2.06; and

     (d) Debentures converted into Common Stock or cash pursuant to Article 14
and Debentures deemed not outstanding pursuant to Article 3.

     “Paying Agent” means the Trustee or such other office or agency designated
by the Company where Debentures may be presented for payment.

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

     “Portal Market” means The Portal Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.

     “Predecessor Debenture” of any particular Debenture means every previous
Debenture evidencing all or a portion of the same debt as that evidenced by
such particular Debenture, and, for the purposes of this definition, any
Debenture authenticated and delivered under Section 2.06 in lieu of a lost,
destroyed or stolen Debenture shall be

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deemed to evidence the same debt as the lost, destroyed or stolen
Debenture that it replaces.

     “Principal Value Conversion” has the meaning specified in Section
14.01(a)(iii).

     “QIB” means a “qualified institutional buyer” as defined in Rule 144A.

     “Record Date” means, with respect to any dividend, distribution or other
transaction or event in which the holders of Common Stock have the right to
receive any cash, securities or other property or in which the Common Stock (or
other applicable security) is exchanged for or converted into any combination
of cash, securities or other property, the date fixed for determination of
shareholders entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors of the Company or by
statute, contract or otherwise).

     “Redemption Date” has the meaning specified in Section 3.02.

     “Redemption Notice” has the meaning specified in Section 3.02.

     “Redemption Price” has the meaning specified in Section 3.01.

     “Registration Rights Agreement” means the Registration Rights Agreement,
dated as of July 7, 2004, among the Company, the Guarantors and the Initial
Purchasers, as amended from time to time in accordance with its terms.

     “Regular Record Date” for the interest payable on any Interest Payment
Date means the close of business on the January 1 or July 1 immediately
preceding such Interest Payment Date (whether or not a Business Day).

     “Repurchase Date” means the Fundamental Change Repurchase Date or the
Company Repurchase Date, as applicable.

     “Repurchase Election” means the Fundamental Change Repurchase Election or
the Company Repurchase Election, as applicable.

     “Repurchase Price” means the Fundamental Change Repurchase Price or the
Company Repurchase Price, as applicable.

     “Responsible Officer” means, when used with respect to the Trustee, any
officer of the Trustee within the Corporate Trust Department (or any successor
unit, department or division of the Trustee) located at the Corporate Trust
Office of the Trustee who has direct responsibility for the administration of
this Indenture and, for the purposes of Section 6.08 and Section 7.01(b), also
means any other officer or person performing similar functions to whom any
corporate trust matter is referred because of such person’s knowledge of any
familiarity with the particular subject.

     “Restricted Securities” has the meaning specified in Section 2.05(c).

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     “Rule 144A” means Rule 144A as promulgated under the Securities Act.

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

     “Significant Subsidiary” means any direct or indirect Subsidiary of the
Company that would be a “significant subsidiary” as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
regulation is in effect on the date hereof.

     “Special Record Date” has the meaning specified in Section 2.03.

     “Stated Maturity” means July 15, 2034.

     “Subsidiary” means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or 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 of one or more subsidiaries of such Person (or any combination
thereof).

     “Tax Original Issue Discount” means the amount of ordinary interest income
that must be accrued with respect to a Debenture as original issue discount for
United States Federal income tax purposes pursuant to U.S. Treasury Regulation
section 1.1272-1.

     “Termination of Trading” means that the Common Stock is neither listed for
trading on a U.S. national securities exchange nor approved for trading on the
National Association of Securities Dealers Automated Quotation System or
another established automated over-the-counter trading market in the United
States.

     “Trading Day” means (a) if the applicable security is listed, admitted for
trading or quoted on the New York Stock Exchange, the National Association of
Securities Dealers Automated Quotation System or another U.S. national or
regional securities exchange, a day on which trading generally occurs on the
New York Stock Exchange, the National Association of Securities Dealers
Automated Quotation System or such other national or regional securities
exchange, as the case may be or (b) if the applicable security is not so
listed, admitted for trading or quoted, any Business Day.

     “Trading Price” means, as of any date of determination, the average of the
secondary market bid quotations per $1,000 principal amount of Debentures
obtained by the Bid Solicitation Agent for $5 million aggregate principal
amount of Debentures at approximately 4:00 p.m., New York City time, on such
determination date from three nationally recognized securities dealers (none of
which shall be an Affiliate of the Company) in The City of New York (or such
other place that may be determined from

10

 

time to time by the Company) selected by the Company; provided, however,
if (a) at least three such bids are not obtained by the Bid Solicitation Agent
or (b) in the Company’s reasonable judgment, the bid quotations are not
indicative of the secondary market value of the Debentures as of such
determination date, then the Trading Price per $1,000 principal amount of the
Debentures for such determination date shall equal (1) the Conversion Rate as
of such determination date multiplied by (2) the average Last Reported Sale
Price of the Common Stock over the five (5) Trading Days ending on such
determination date appropriately adjusted to take into account the occurrence,
during the period commencing on the first of such Trading Days during such five
(5) Trading Day period and ending on such determination date, of any event
described in Section 14.06 or Section 14.07. The Bid Solicitation Agent shall
solicit bids from securities dealers that the Company believes to be willing to
bid for Debentures. The Trading Price shall be determined by the Company.

     “Trust Indenture Act” means the Trust Indenture Act of 1939, as amended,
as it was in force at the date of this Indenture, except as provided in Section
10.03 and Section 14.07; provided that if the Trust Indenture Act of 1939 is
amended after the date hereof, the term “Trust Indenture Act” shall mean, to
the extent required by such amendment, the Trust Indenture Act of 1939 as so
amended.

     “Trustee” means U.S. Bank National Association and its successors and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a party and any successor trustee at the time serving
as successor trustee hereunder.

Article 2

Issue, Description, Execution, Registration

and Exchange of Debentures

Section 2.01
Designation Amount and Issue of Debentures. The Debentures
shall be designated as “3.5% Senior Convertible Debentures due 2034”.
Debentures not to exceed the aggregate principal amount of $330,000,000 (except
pursuant to Section 2.05 and Section 2.06 hereof) upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures to or upon the written order of the
Company, signed by its Chief Executive Officer, its President, its Chief
Operating Officer or any Vice President (whether or not designated by a number
or numbers or word or words added before or after the title “Vice President”),
without any further action by the Company hereunder.

Section 2.02
Form of Debentures. The Debentures, the Guarantees and the
Trustee’s certificate of authentication to be borne by such Debentures shall be
substantially in the form set forth in Exhibit A. The terms and provisions
contained in the form of Debenture attached as Exhibit A hereto shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent
applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.

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     Any of the Debentures may have such letters, numbers or other marks of
identification and such notations, legends, endorsements or changes as the
officers executing the same may approve (execution thereof to be conclusive
evidence of such approval) and as are not inconsistent with the provisions of
this Indenture, or as may be required by the Custodian, the Depositary or by
the National Association of Securities Dealers, Inc. in order for the
Debentures to be tradable on The Portal Market or as may be required for the
Debentures to be tradable on any other market developed for trading of
securities pursuant to Rule 144A or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any securities exchange or automated quotation system on
which the Debentures may be listed, or to conform to usage, or to indicate any
special limitations or restrictions to which any particular Debentures are
subject.

     So long as the Debentures are eligible for book-entry settlement with the
Depositary, or unless otherwise required by law, or otherwise contemplated by
Section 2.05(a), all of the Debentures will be represented by one or more
Debentures in global form registered in the name of the Depositary or the
nominee of the Depositary (a “Global Debenture”). The transfer and exchange of
beneficial interests in any such Global Debenture shall be effected through the
Depositary in accordance with this Indenture and the applicable procedures of
the Depositary. Except as provided in Section 2.05(a), beneficial holders of a
Global Debenture will not receive or be entitled to receive physical delivery
of certificates in definitive form and will not be considered holders of such
Global Debenture.

     Any Global Debenture shall represent such of the outstanding Debentures as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Debentures from time to time endorsed thereon
and that the aggregate amount of outstanding Debentures represented thereby may
from time to time be increased or reduced to reflect redemptions, repurchases,
conversions, transfers or exchanges permitted hereby. Any endorsement of a
Global Debenture to reflect the amount of any increase or decrease in the
amount of outstanding Debentures represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in such manner and
upon instructions given by the holder of such Debentures in accordance with
this Indenture. Payment of principal of and Interest on any Global Debenture
shall be made to the holder of such Debenture.

     Section 2.03
Date and Denomination of Debentures; Payments of Interest.
The Debentures shall be issuable in fully registered form without interest
coupons in denominations of $1,000 principal amount and integral multiples
thereof. Each Debenture shall be dated the date of its authentication and
shall bear interest at the rate, and from the date, specified on the face of
the form of Debenture attached as Exhibit A hereto. Interest on the Debentures
shall be computed on the basis of a 360-day year comprised of twelve 30-day
months.

     The Person in whose name any Debenture (or its Predecessor Debenture) is
registered on the Debenture Register at the close of business on the Regular
Record Date with respect to an Interest Payment Date shall be entitled to
receive the Interest payable

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on such Interest Payment Date, except that the
Interest payable upon redemption or repurchase will be payable to the Person to
whom principal is payable pursuant to such redemption or repurchase (unless the
Redemption Date or the Repurchase Date, as the case may be, is an Interest
Payment Date, in which case the semi-annual payment of interest becoming due on
such date, if any, shall be payable to the holders of such Debentures
registered as such on the applicable Regular Record Date). Notwithstanding the
foregoing, if any Debenture (or portion thereof) is converted into Common Stock
during the period after a Regular Record Date to, but excluding, the next
succeeding Interest Payment Date and such Debenture (or portion thereof) has
been called or tendered for redemption on a Redemption Date which occurs during
such period, the Company shall not be required to pay interest on such Interest
Payment Date in respect of any such Debenture (or portion thereof), except as
provided in Section 14.02. Interest shall be payable at the office of the
Company maintained by the Company for such purposes in the Borough of
Manhattan, The City of New York, which shall initially be an office or agency
of the Trustee. The Company shall pay Interest (i) on any Debentures in
certificated form by check mailed to the address of the Person entitled thereto
as it appears in the Debenture Register (or upon written notice, by wire
transfer in immediately available funds, if such Person is entitled to Interest
on Debentures with an aggregate principal amount in excess of $2,000,000) or
(ii) on any Global Debenture by wire transfer of immediately available funds to
the account of the Depositary or its nominee.

     Any Interest on any Debenture which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called “Defaulted
Interest”) shall forthwith cease to be payable to the Debentureholder on the
relevant Regular Record Date by virtue of his having been such Debentureholder,
and such Defaulted Interest shall be paid by the Company, at its election in
each case, as provided in clause (1) or (2) below:

     (1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Debentures (or their respective Predecessor
Debentures) are registered at the close of business on a “Special Record Date”
for the payment of such Defaulted Interest, which shall be the date fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Debenture and the date
of the proposed payment (which shall be not less than twenty-five (25) days
after the receipt by the Trustee of such notice, unless the Trustee shall
consent to an earlier date), and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit on or prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than fifteen (15) days and not less than ten
(10) days prior to the date of the proposed payment, and not less than ten (10)
days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted

13

 

Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each holder at his address as it
appears in the Debenture Register, not less than ten (10) days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Debentures (or their
respective Predecessor Debentures) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2) of this Section 2.03.

     (2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
or automated quotation system on which the Debentures may be listed or
designated for issuance, and upon such notice as may be required by such
exchange or automated quotation system, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.

Section 2.04
Execution of Debentures. The Debentures shall be signed in
the name and on behalf of the Company by the manual or facsimile signature of
its Chief Executive Officer, President, Chief Operating Officer or any Vice
President (whether or not designated by a number or numbers or word or words
added before or after the title “Vice President”). Only such Debentures as
shall bear thereon a certificate of authentication substantially in the form
set forth on the form of Debenture attached as Exhibit A hereto, manually
executed by the Trustee (or an authenticating agent appointed by the Trustee as
provided by Section 17.13), shall be entitled to the benefits of this Indenture
or be valid or obligatory for any purpose. Such certificate by the Trustee (or
such an authenticating agent) upon any Debenture executed by the Company shall
be conclusive evidence that the Debenture so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.

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

Section 2.05
Exchange and Registration of Transfer of Debentures; Restrictions
on Transfer.

     (a) The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 4.02 being herein
sometimes collectively referred to as the “Debenture Register”) in which,
subject to such reasonable regulations

14

 

as it may prescribe, the Company shall
provide for the registration of Debentures and of transfers of Debentures. The
Debenture Register shall be in written form or in any form capable of being
converted into written form within a reasonably prompt period of time. The
Trustee is hereby appointed “Debenture Registrar” for the purpose of
registering Debentures and transfers of Debentures as herein provided. The
Company may appoint one or more co-registrars in accordance with Section 4.02.

     Upon surrender for registration of transfer of any Debenture to the
Debenture Registrar or any co-registrar, and satisfaction of the requirements
for such transfer set forth in this Section 2.05, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Debentures of any authorized
denominations and of a like aggregate principal amount and bearing such
restrictive legends as may be required by this Indenture.

     Debentures may be exchanged for other Debentures of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Debentures to be exchanged at any such office or agency maintained by the
Company pursuant to Section 4.02. Whenever any Debentures are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Debentures which the Debentureholder making the exchange is
entitled to receive bearing registration numbers not contemporaneously
outstanding.

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

     All Debentures presented or surrendered for registration of transfer or
for exchange, redemption, repurchase or conversion shall (if so required by the
Company or the Debenture Registrar) be duly endorsed, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company, duly executed by the Debentureholder thereof or his attorney duly
authorized in writing.

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

     Neither the Company nor the Trustee nor any Debenture Registrar shall be
required to exchange or register a transfer of (a) any Debentures for a period
of fifteen (15) days next preceding any selection of Debentures to be redeemed,
(b) any Debentures or portions thereof called for redemption pursuant to
Section 3.01 (c) any Debentures or portions thereof surrendered for conversion
pursuant to Article 14, (d) any Debentures or
portions thereof tendered for repurchase (and not withdrawn) pursuant to
Section 3.05 or (e) any Debentures or portions thereof tendered for repurchase
(and not withdrawn) pursuant to Section 3.06.

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     (b) The following provisions shall apply only to Global Debentures:

          (i) Each Global Debenture authenticated under this Indenture shall be
registered in the name of the Depositary or a nominee thereof and delivered to
such Depositary or a nominee thereof or Custodian therefor, and each such
Global Debenture shall constitute a single Debenture for all purposes of this
Indenture.

          (ii) Notwithstanding any other provision in this Indenture, no Global
Debenture may be exchanged in whole or in part for Debentures registered, and
no transfer of a Global Debenture in whole or in part may be registered, in the
name of any Person other than the Depositary or a nominee thereof unless (A)
the Depositary (i) has notified the Company that it is unwilling or unable to
continue as Depositary for such Global Debenture and a successor depositary has
not been appointed by the Company within ninety (90) days or (ii) has ceased to
be a clearing agency registered under the Exchange Act, (B) an Event of Default
has occurred and is continuing, (C) the Company, in its sole discretion,
notifies the Trustee in writing that it no longer wishes to have all the
Debentures represented by Global Debentures or (D) any beneficial holder
reasonably requests such exchange on terms acceptable to the Company, the
Trustee and the Depositary, which in the case of the Trustee may include, in
the Trustee’s sole discretion, among other things, the requirement that (i) the
Trustee and any Debenture Registrar receive (a) from the Company or the
Depositary, a written order, in either case requesting such exchange, and an
Opinion of Counsel (which upon receipt thereof the Trustee and such Debenture
Registrar shall be fully protected in relying) to the effect that (x) all
securities laws in connection with such exchange have been complied with and
(y) such exchange is otherwise authorized or permitted by this Indenture; and
(b) from such beneficial holder (x) an affidavit as to its beneficial ownership
interest in such Global Debenture and/or (y) an indemnity, reasonably
satisfactory to the Trustee and such Debenture Registrar, against any loss,
liability or expense to the Trustee and such Debenture Registrar to the extent
that the Trustee or Debenture Registrar acts upon such order, affidavit and/or
indemnity; and (ii) such exchange can be accomplished in a manner that is
practicable and not inconsistent with the rules of any applicable Depositary or
securities exchange upon which the Debentures may be listed for trading. Any
Global Debenture exchanged pursuant to clause (A) or (B) above shall be so
exchanged in whole and not in part and any Global Debenture exchanged pursuant
to clause (C) or (D) above may be exchanged in whole or from time to time in
part as directed by the Company. Any Debenture issued in exchange for a Global
Debenture or any portion thereof shall be a Global Debenture; provided that any
such Debenture so issued that is registered in the name of a Person other than
the Depositary or a nominee thereof shall not be a Global Debenture.

          (iii) Debentures issued in exchange for a Global Debenture or any portion
thereof pursuant to clause (ii) above shall be issued in definitive, fully
registered form, without interest coupons, shall have an aggregate principal
amount equal to that of
such Global Debenture 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 any legends required hereunder. Any
Global Debenture to be exchanged in whole shall be surrendered by the
Depositary to the Trustee, as Debenture Registrar.

16

 

With regard to any Global
Debenture to be exchanged in part, either such Global Debenture shall be so
surrendered for exchange or, if the Trustee is acting as Custodian for the
Depositary or its nominee with respect to such Global Debenture, 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 make available for delivery the Debenture issuable on such
exchange to or upon the written order of the Depositary or an authorized
representative thereof.

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

          (v) Neither any members of, or participants in, the Depositary (“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 Debenture
registered in the name of the Depositary or any nominee thereof, 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 Debenture 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 beneficial holder of any Debenture.

          (vi) At such time as all interests in a Global Debenture have been
redeemed, repurchased, converted, canceled or exchanged for Debentures in
certificated form, such Global Debenture shall, upon receipt thereof, be
canceled by the Trustee in accordance with standing procedures and instructions
existing between the Depositary and the Custodian. At any time prior to such
cancellation, if any interest in a Global Debenture is redeemed, repurchased,
converted, canceled or exchanged for Debentures in certificated form, the
principal amount of such Global Debenture shall, in accordance with the
standing procedures and instructions existing between the Depositary and the
Custodian, be appropriately reduced, and an endorsement shall be made on such
Global Debenture, by the Trustee or the Custodian, at the direction of the
Trustee, to reflect such reduction.

     (c) Every Debenture that bears or is required under this Section 2.05(c)
to bear the legend set forth in this Section 2.05(c) (together with any Common
Stock issued upon conversion of the Debentures and required to bear the legend
set forth in Section
2.05(d), collectively, the “Restricted Securities”) shall be subject to
the restrictions on transfer set forth in this Section 2.05(c) (including those
set forth in the legend below) unless such restrictions on transfer shall be
waived by written consent of the Company, and the holder of each such
Restricted Security, by such holder’s acceptance thereof,

17

 

agrees to be bound by
all such restrictions on transfer. As used in Section 2.05(c) and Section
2.05(d), the term “transfer” encompasses any sale, pledge, loan, transfer or
other disposition whatsoever of any Restricted Security or any interest
therein.

     Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Debenture (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued upon
conversion thereof, which shall bear the legend set forth in Section 2.05(d),
if applicable) shall bear a legend in substantially the following form, unless
such Debenture has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be
effective at the time of such transfer) or pursuant to Rule 144 under the
Securities Act or any similar provision then in force, or unless otherwise
agreed by the Company in writing, with written notice thereof to the Trustee:

     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 AND THE COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

     THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF CAPITALSOURCE INC.
THAT (A) PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF
THE SECURITY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (I) TO CAPITALSOURCE INC. OR ANY SUBSIDIARY THEREOF (II) 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, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, IN EACH CASE 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 OF THE RESALE RESTRICTIONS REFERRED TO IN
(A) ABOVE. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF
THIS SECURITY PURSUANT TO CLAUSE (A)(IV) ABOVE OR UPON ANY TRANSFER OF THIS
SECURITY UNDER RULE

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144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION). THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTION. IN ADDITION, THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY,
ENGAGE IN ANY HEDGING TRANSACTIONS WITH REGARD TO THIS SECURITY OR THE COMMON
STOCK ISSUABLE UPON CONVERSION HEREOF EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION).

     Any Debenture (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms or as to conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Debenture for exchange
to the Debenture Registrar in accordance with the provisions of this Section
2.05, be exchanged for a new Debenture or Debentures, of like tenor and
aggregate principal amount, which shall not bear the restrictive legend
required by this Section 2.05(c). If the Restricted Security surrendered for
exchange is represented by a Global Debenture bearing the legend set forth in
this Section 2.05(c), the principal amount of the legended Global Debenture
shall be reduced by the appropriate principal amount and the principal amount
of a Global Debenture without the legend set forth in this Section 2.05(c)
shall be increased by an equal principal amount. If a Global Debenture without
the legend set forth in this Section 2.05(c) is not then outstanding, the
Company shall execute and the Trustee shall authenticate and deliver an
unlegended Global Debenture to the Depositary.

     (d) Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
stock certificate representing Common Stock issued upon conversion of any
Debenture shall bear a legend in substantially the following form, unless such
Common Stock has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be
effective at the time of such transfer) or pursuant to Rule 144 under the
Securities Act or any similar provision then in force, or such Common Stock has
been issued upon conversion of Debentures that have been transferred pursuant
to a registration statement that has been declared effective under the
Securities Act or pursuant to Rule 144 under the Securities Act or any similar
provision then in force, or unless otherwise agreed by the Company in writing
with written notice thereof to the transfer agent:

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE ''SECURITIES ACT’’), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE
HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, (1) REPRESENTS THAT IT IS A
“QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT (“RULE

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144A”)); (2) AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR
ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THIS SECURITY UNDER RULE 144(k) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION), ONLY (A) TO CAPITALSOURCE INC. (THE “ISSUER”),
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER), (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A, IN COMPLIANCE WITH RULE 144A TO A PERSON IT REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (D) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM;
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND
WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS SECURITY PURSUANT TO
CLAUSE 2(B) ABOVE OR UPON ANY TRANSFER OF THIS SECURITY UNDER RULE 144 UNDER
THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).

     THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION
RIGHTS AGREEMENT DATED JULY 7, 2004 AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE
BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS
AGREEMENT.

     Any such Common Stock as to which such restrictions on transfer shall have
expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.05(d).

     (e) Any Debenture or Common Stock issued upon the conversion of a
Debenture that, prior to the expiration of the holding period applicable to
sales thereof
under Rule 144(k) under the Securities Act (or any successor provision),
is purchased or owned by the Company or any Affiliate thereof may not be resold
by the Company or such Affiliate unless registered under the Securities Act or
resold pursuant to an exemption from the registration requirements of the
Securities Act in a transaction which

20

 

results in such Debentures or Common
Stock, as the case may be, no longer being “restricted securities” (as defined
under Rule 144).

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

     Section 2.06
Mutilated, Destroyed, Lost or Stolen Debentures. In case any
Debenture shall become mutilated or be destroyed, lost or stolen, the Company
in its discretion may execute, and upon its written request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Debenture, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Debenture, or in
lieu of and in substitution for the Debenture so destroyed, lost or stolen. In
every case, the applicant for a substituted Debenture shall furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent such
security or indemnity as may be required by them to save each of them harmless
for any loss, liability, cost or expense caused by or connected with such
substitution, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the destruction, loss or
theft of such Debenture and of the ownership thereof.

     Following receipt by the Trustee or such authenticating agent, as the case
may be, of satisfactory security or indemnity and evidence, as described in the
preceding paragraph, the Trustee or such authenticating agent may authenticate
any such substituted Debenture and make available for delivery such Debenture.
Upon the issuance of any substituted Debenture, the Company may require the
payment by the holder of a sum sufficient to cover any tax, assessment or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Debenture which has matured or is
about to mature or has been called for redemption or has been tendered for
repurchase upon a Fundamental Change (and not withdrawn) or has been
surrendered for repurchase on a Repurchase Date (and not withdrawn) or is to be
converted into Common Stock shall become mutilated or be destroyed, lost or
stolen, the Company may, instead of issuing a substitute Debenture, pay or
authorize the payment of or convert or authorize the conversion of the same
(without surrender thereof except in the case of a mutilated Debenture), as the
case may be, if the applicant for such payment or conversion shall furnish to
the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them
to save each of them harmless from any loss, liability, cost or expense caused
by or in connection with such substitution, and, in every case of destruction,
loss or theft, the applicant shall also furnish to the Company, the Trustee
and, if applicable, any Paying Agent or Conversion Agent evidence to their
satisfaction of the destruction, loss or theft of such Debenture and of the
ownership thereof.

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     Every substitute Debenture issued pursuant to the provisions of this
Section 2.06 by virtue of the fact that any Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of (but shall be subject to all
the limitations set forth in) this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder. To the extent permitted by
law, all Debentures shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment
or conversion or redemption or repurchase of mutilated, destroyed, lost or
stolen Debentures and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion or redemption
or repurchase of negotiable instruments or other securities without their
surrender.

Section 2.07 Temporary Debentures. Pending the preparation of Debentures
in certificated form, the Company may execute and the Trustee or an
authenticating agent appointed by the Trustee shall, upon the written request
of the Company, authenticate and deliver temporary Debentures (printed or
lithographed). Temporary Debentures shall be issuable in any authorized
denomination, and substantially in the form of the Debentures in certificated
form, but with such omissions, insertions and variations as may be appropriate
for temporary Debentures, all as may be determined by the Company. Every such
temporary Debenture shall be executed by the Company and authenticated by the
Trustee or such authenticating agent upon the same conditions and in
substantially the same manner, and with the same effect, as the Debentures in
certificated form. Without unreasonable delay, the Company will execute and
deliver to the Trustee or such authenticating agent Debentures in certificated
form and thereupon any or all temporary Debentures may be surrendered in
exchange therefor, at each office or agency maintained by the Company pursuant
to Section 4.02 and the Trustee or such authenticating agent shall authenticate
and make available for delivery in exchange for such temporary Debentures an
equal aggregate principal amount of Debentures in certificated form. Such
exchange shall be made by the Company at its own expense and without any charge
therefor. Until so exchanged, the temporary Debentures shall in all respects
be entitled to the same benefits and subject to the same limitations under this
Indenture as Debentures in certificated form authenticated and delivered
hereunder.

Section 2.08 Cancellation of Debentures.
All Debentures surrendered for the purpose of payment, redemption,
repurchase, conversion, exchange or registration of transfer shall, if
surrendered to the Company or any Paying Agent or any Debenture Registrar or
any Conversion Agent, be surrendered to the Trustee and promptly canceled by
it, or, if surrendered to the Trustee, shall be promptly canceled by it, and no
Debentures shall be issued in lieu thereof except as expressly permitted by any
of the provisions of this Indenture. The Trustee shall dispose of such
canceled Debentures in accordance with its customary procedures. If the
Company shall acquire any of the Debentures, such acquisition shall not operate
as a redemption, repurchase or satisfaction of the indebtedness represented by
such Debentures unless and until the same are delivered to the Trustee for
cancellation.

22

 

Section 2.09 CUSIP Numbers. The Company in issuing the Debentures may use
"CUSIP” or “ISIN” numbers and/or similar numbers (if then generally in use),
and, if so, the Trustee shall use “CUSIP” and/or “ISIN” numbers in notices of
redemption as a convenience to Debentureholders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be
affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the “CUSIP” and/or similar
numbers.

Section 2.10 Ranking.

     (a) For purposes of this Section 2.10 only, “Indebtedness” means, without
duplication, the principal or face amount of (i) all obligations for borrowed
money, (ii) all obligations evidenced by debentures, notes or other similar
instruments, (iii) all obligations in respect of letters of credit or bankers
acceptances or similar instruments (or reimbursement obligations with respect
thereto), (iv) all obligations to pay the deferred purchase price of property
or services, (v) all obligations as lessee which are capitalized in accordance
with generally accepted accounting principles, and (vi) all Indebtedness of
others guaranteed by the Company or for which the Company is legally
responsible or liable (whether by agreement to purchase indebtedness of, or to
supply funds or to invest in, others).

     (b) The Indebtedness of the Company arising under or in connection with
this Indenture and every outstanding Debenture issued under this Indenture from
time to time constitutes and will constitute a senior unsecured general
obligation of the Company, ranking equally with any existing and other future
senior unsecured Indebtedness of the Company, and ranking senior in right of
payment to any future Indebtedness of the Company that is expressly made
subordinate to the Debentures by the terms of such Indebtedness.

Article 3

Redemption and Repurchase of Debentures

Section 3.01 Company’s Right to Redeem. Prior to July 15, 2011, the
Debentures will not be redeemable at the Company’s option. At any time on or
after July 15, 2011 and prior to Stated Maturity, the Company, at its option,
may redeem the Debentures, in whole or in part, in accordance with the
provisions of Section 3.02 and Section 3.03 on the Redemption Date (as defined
below) for a redemption price (the “Redemption Price”) in cash equal to 100% of
the principal amount of the Debentures to be redeemed together with accrued and
unpaid Interest on the Debentures redeemed to but excluding the Redemption
Date.

     If the Redemption Date is an Interest Payment Date, Interest shall be paid
on such Interest Payment Date to the record holder on the relevant Record Date.

23

 

Section 3.02 Notice of Optional Redemption; Selection of Debentures.

     (a) In case the Company shall desire to exercise the right to redeem all
or, as the case may be, any part of the Debentures pursuant to Section 3.01, it
shall fix a date for redemption (the “Redemption Date”) and it or, at the
written request of the Company received by the Trustee not fewer than thirty
(30) days prior (or such shorter period of time as may be acceptable to the
Trustee) to the Redemption Date, the Trustee in the name of and at the expense
of the Company, shall mail or cause to be mailed a notice of such redemption (a
“Redemption Notice”) not fewer than thirty (30) nor more than sixty (60) days
prior to the Redemption Date to each holder of Debentures to be redeemed at its
last address as the same appears on the Debenture Register; provided that if
the Company shall give such notice, it shall also give written notice of the
Redemption Date to the Trustee. Such mailing shall be by first class mail.
The notice, if mailed in the manner herein provided, shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to the holder of any Debenture designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Debenture.

     (b) Each such Redemption Notice shall specify the aggregate principal
amount of Debentures to be redeemed, the CUSIP, ISIN or similar number or
numbers of the Debentures being redeemed, the Redemption Date (which shall be a
Business Day), the Redemption Price at which Debentures are to be redeemed, the
place or places of payment, that payment will be made upon presentation and
surrender of such Debentures, that Interest accrued to the Redemption Date will
be paid as specified in said notice, and that on and after said date Interest
thereon or on the portion thereof to be redeemed will cease to accrue. Such
notice shall also state the current Conversion Rate and the date on which the
right to convert such Debentures or portions thereof into Common Stock will
expire. If fewer than all the Debentures are to be redeemed, the Redemption
Notice shall identify the Debentures to be redeemed (including CUSIP, ISIN or
similar numbers, if any). In case any Debenture is to be redeemed in part
only, the Redemption Notice shall
state the portion of the principal amount thereof to be redeemed and shall
state that, on and after the Redemption Date, upon surrender of such Debenture,
a new Debenture or Debentures in principal amount equal to the unredeemed
portion thereof will be issued.

     (c) On or prior to the Redemption Date specified in the Redemption Notice
given as provided in this Section 3.02, the Company will deposit with the
Trustee or with one or more Paying Agents (or, if the Company is acting as its
own Paying Agent, set aside, segregate and hold in trust as provided in Section
4.04) an amount of money sufficient to redeem on the Redemption Date all the
Debentures (or portions thereof) so called for redemption (other than those
theretofore surrendered for conversion into Common Stock) at the appropriate
Redemption Price; provided that if such payment is made on the Redemption Date
it must be received by the Trustee or Paying Agent, as the case may be, by
11:00 a.m., New York City time, on such date. The Company shall be entitled to
retain any interest, yield or gain on amounts deposited with the Trustee or any
Paying Agent pursuant to this Section 3.02(c) in excess of amounts required
hereunder to pay the Redemption Price and accrued Interest to, but excluding,
the Redemption Date.

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Notwithstanding the last sentence of Section 7.05, if any
Debenture called for redemption is converted pursuant hereto prior to such
Redemption Date, any money deposited with the Trustee or any Paying Agent or so
segregated and held in trust for the redemption of such Debenture shall be paid
to the Company upon its written request, or, if then held by the Company, shall
be discharged from such trust. Whenever any Debentures are to be redeemed, the
Company will give the Trustee written notice in the form of an Officers’
Certificate not fewer than forty-five (45) days (or such shorter period of time
as may be acceptable to the Trustee) prior to the Redemption Date as to the
aggregate principal amount of Debentures to be redeemed.

     (d) If less than all of the outstanding Debentures are to be redeemed, the
Trustee shall select the Debentures or portions thereof of the Global Debenture
or the Debentures in certificated form to be redeemed (in principal amounts of
$1,000 or integral multiples thereof) by lot, on a pro rata basis or by another
method the Trustee deems fair and appropriate. If any Debenture selected for
partial redemption is submitted for conversion in part after such selection,
the portion of such Debenture submitted for conversion shall be deemed (so far
as may be possible) to be from the portion selected for redemption. The
Debentures (or portions thereof) so selected shall be deemed duly selected for
redemption for all purposes hereof, notwithstanding that any such Debenture is
submitted for conversion in part before the mailing of the Redemption Notice.

     Upon any redemption of less than all of the outstanding Debentures, the
Company and the Trustee may (but need not), solely for purposes of determining
the pro rata allocation among such Debentures as are unconverted and
outstanding at the time of redemption, treat as outstanding any Debentures
surrendered for conversion during the period of fifteen (15) days next
preceding the mailing of a Redemption Notice and may (but need not) treat as
outstanding any Debenture authenticated and delivered during such period in
exchange for the unconverted portion of any Debenture converted in part during
such period.

Section 3.03 Payment of Debentures Called for Redemption by the Company.
If notice of redemption has been given as provided in Section 3.02, the
Debentures or portion of Debentures with respect to which such notice has been
given shall, unless converted into Common Stock pursuant to the terms hereof,
become due and payable on the Redemption Date and at the place or places stated
in such notice at the applicable Redemption Price, and on and after the
Redemption Date (unless the Company shall default in the payment of such
Debentures at the Redemption Price) Interest on the Debentures or portion of
Debentures so called for redemption shall cease to accrue and, after the close
of business on the second Business Day immediately preceding the Redemption
Date (unless the Company shall default in the payment of such Debentures at the
Redemption Price) such Debentures shall cease to be convertible into Common
Stock and, except as provided in Section 7.05, to be entitled to any benefit or
security under this Indenture, and the holders thereof shall have no right in
respect of such Debentures except the right to receive the Redemption Price
thereof. On presentation and surrender of such Debentures at a place of
payment in said notice specified, the said Debentures or the specified portions
thereof shall be paid and redeemed by the Company at the applicable Redemption
Price; provided that if the applicable Redemption Date is an Interest Payment
Date, the Interest

25

 

payable on such Interest Payment Date shall be paid on such
Interest Payment Date to the holders of record of such Debentures on the
applicable Record Date instead of the holders surrendering such Debentures for
redemption on such date.

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

     Notwithstanding the foregoing, the Trustee shall not redeem any Debentures
or mail any Redemption Notice during the continuance of a default in payment of
Interest on the Debentures. If any Debenture called for redemption shall not
be so paid upon surrender thereof for redemption, the principal shall, until
paid or duly provided for, continue to bear interest at the rate borne by the
Debenture, if any, compounded semi-annually, and such Debenture shall remain
convertible into Common Stock until the principal and Interest shall have been
paid or duly provided for. The Company will notify all of the holders if the
Company redeems any of the Debentures.

Section 3.04 Conversion Arrangement on Call for Redemption. In connection
with any redemption of Debentures, the Company may arrange for the purchase and
conversion of any Debentures called for redemption by an agreement with one or
more investment bankers or other purchasers to purchase such Debentures by
paying to the Trustee in trust for the Debentureholders, on or prior to 11:00
a.m. New York City time on the Redemption Date, an amount that, together with
any amounts deposited with the Trustee by the Company for the redemption of
such Debentures, is not less than the Redemption Price of such Debentures.
Notwithstanding anything to the contrary contained in this Article 3, the
obligation of the Company to pay the Redemption Price of such Debentures shall
be deemed to be satisfied and discharged to
the extent such amount is so paid by such purchasers. If such an
agreement is entered into, any Debentures not duly surrendered for conversion
by the Debentureholders thereof may, at the option of the Company, be deemed,
to the fullest extent permitted by law, acquired by such purchasers from such
Debentureholders and (notwithstanding anything to the contrary contained in
Article 14) surrendered by such purchasers for conversion, all as of
immediately prior to the close of business on the Business Day prior to the
Redemption Date, subject to payment of the above amount as aforesaid. The
Trustee shall hold and pay to the Debentureholders whose Debentures are
selected for redemption any such amount paid to it for purchase and conversion
in the same manner as it would moneys deposited with it by the Company for the
redemption of Debentures. Without the Trustee’s prior written consent, no
arrangement between the Company and such purchasers for the purchase and
conversion of any Debentures shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture, and the Company agrees to indemnify the Trustee from, and hold
it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Debentures between the Company and such purchasers, including the costs and
expenses incurred by the Trustee in the defense of any claim or liability
arising out of or in connection with the exercise or performance of any of its

26

 

powers, duties, responsibilities or obligations under this Indenture, except in
the case of the Trustee’s negligence or willful misconduct.

Section 3.05 Repurchase of Debentures by the Company at Option of Holders upon
a Fundamental Change.

     (a) If a Fundamental Change shall occur at any time prior to Stated
Maturity, each holder shall have the right, at such holder’s option, to require
the Company to repurchase any or all of such holder’s Debentures, or any
portion of the principal amount thereof that is equal to $1,000 or an integral
multiple of $1,000, on the date specified in the Fundamental Change Company
Notice, which date shall be no more than thirty (30) Business Days after the
date of the Fundamental Change Company Notice (subject to extension to comply
with applicable law) (the “Fundamental Change Repurchase Date”). The Company
shall repurchase such Debentures at a price (the “Fundamental Change Repurchase
Price”) equal to 100% of the principal amount thereof plus any accrued and
unpaid Interest to but excluding the Fundamental Change Repurchase Date.

     (b) On
or before the thirtieth (30th) day after the occurrence of a
Fundamental Change, the Company, or at its written request the Trustee in the
name of and at the expense of the Company (which request must be received by
the Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree to
a shorter period), shall mail or cause to be mailed, by first class mail, to
all holders of record on such date a notice (the “Fundamental Change Company
Notice”) of the occurrence of such Fundamental Change and of the repurchase
right at the option of the holders arising as a result thereof to each holder
of Debentures at its last address as the same appears on the Debenture
Register; provided that if the Company shall give such notice, it shall also
give written notice of the Fundamental Change to the Trustee and Paying Agent,
if other than the Trustee, at such time as it is mailed to Debentureholders.
Such notice, if mailed in the manner herein provided, shall
be conclusively presumed to have been duly given, whether or not the
holder receives such notice. Each Fundamental Change Company Notice shall
state, among other things:

          (i) the events causing the Fundamental Change;

          (ii) the date of the Fundamental Change;

          (iii) the last date on which a holder may exercise the repurchase right;

          (iv) the Fundamental Change Repurchase Price, excluding accrued and unpaid
Interest, the applicable Conversion Rate at the time of such notice (and any
applicable adjustments to the Conversion Rate) and, to the extent known at the
time of such notice, the amount of Interest that will be payable with respect
to the Debentures on the Fundamental Change Repurchase Date;

          (v) whether the Fundamental Change Repurchase Price will be paid in cash
or shares of Common Stock;

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          (vi) if shares of Common Stock will be used to pay the Fundamental Change
Repurchase Price:

               (A) the method for valuing the shares of Common Stock to be delivered in
connection with the repurchase; and

               (B) that Debentureholders will bear the market risk with respect to the
value of the shares of Common Stock to be delivered from the date the number of
shares is determined;

          (vii) the Fundamental Change Repurchase Date;

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

          (ix) that Debentures as to which a Fundamental Change Repurchase Notice
has been given by the holder may be converted only if the election has been
withdrawn by the holder in accordance with the terms of this Indenture;
provided that the Debentures are otherwise convertible in accordance with
Section 14.01;

          (x) that the holder shall have the right to withdraw any Debentures
surrendered prior to the close of business on the Business Day immediately
preceding the Fundamental Change Repurchase Date (or any such later time as may
be required by applicable law);

          (xi) a description of the procedures which a Debentureholder must follow
to exercise such repurchase right or to withdraw any surrendered Debentures;

          (xii) the CUSIP, ISIN or similar number or numbers of the Debentures (if
then generally in use); and

          (xiii) briefly, the conversion rights of the Debentures and whether, at
the time of such notice, the Debentures are eligible for conversion.

     No failure of the Company to give the foregoing notices and no defect
therein shall limit the Debentureholders’ repurchase rights or affect the
validity of the proceedings for the repurchase of the Debentures pursuant to
this Section 3.05.

     (c) Debentures shall be repurchased pursuant to this Section 3.05 at the
option of the holder upon:

          (i) delivery to the Trustee (or other Paying Agent appointed by the
Company) by a holder of a duly completed notice (a “Fundamental Change
Repurchase Notice”) in the form set forth on the reverse of the Debenture at
any time prior to the close of business on the Business Day immediately
preceding the Fundamental Change Repurchase Date (subject to extension to
comply with applicable law) stating:

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               (A) if certificated, the certificate numbers of the Debentures which the
holder shall deliver to be repurchased;

               (B) the portion of the principal amount of the Debentures that the holder
shall deliver to be repurchased, which portion must be $1,000 or an integral
multiple thereof; and

               (C) that such Debentures shall be repurchased as of the Fundamental Change
Repurchase Date pursuant to the terms and conditions specified in the
Debentures and in the Indenture; and

          (ii) delivery or book-entry transfer of the Debentures to the Trustee (or
other Paying Agent appointed by the Company) simultaneously with or at any time
after delivery of the Fundamental Change Repurchase Notice (together with all
necessary endorsements) at the Corporate Trust Office of the Trustee (or other
Paying Agent appointed by the Company) in the Borough of Manhattan, such
delivery or transfer being a condition to receipt by the holder of the
Fundamental Change Repurchase Price therefor; provided that such Fundamental
Change Repurchase Price shall be so paid pursuant to this Section 3.05 only if
the Debentures so delivered or transferred to the Trustee (or other Paying
Agent appointed by the Company) shall conform in all respects to the
description thereof in the related Fundamental Change Repurchase Notice. All
questions as to the validity, eligibility (including time of receipt) and
acceptance of any Debenture for repurchase shall be determined by the Company,
whose determination shall be final and binding absent manifest error.

     If the Debentures are not in certificated form, holders must provide
notice of their election in accordance with the appropriate procedures of the
Depositary.

     (d) The Debentures to be repurchased pursuant to this Section 3.05 shall
be paid for in cash; provided that upon the occurrence of a Fundamental Change
that does not result in a Termination of Trading, the Debentures to be
repurchased may be paid for,
at the election of the Company, in cash or Common Stock, subject to the
conditions set forth in clause (e) of this Section 3.05.

     (e) If the Company elects to pay the Fundamental Change Repurchase Price
in Common Stock, the number of shares of Common Stock to be paid will equal the
quotient obtained by dividing (i) the Fundamental Change Repurchase Price by
(ii) 98% of the average Last Reported Sale Price of the shares of Common Stock
for the five consecutive Trading Day period immediately preceding the second
Business Day immediately preceding the Fundamental Change Repurchase Date,
appropriately adjusted to take into account the occurrence, during the period
commencing on the first Trading Day during the five Trading Day period and
ending on the Fundamental Change Repurchase Date, of any event described in
Section 14.06, subject to the next succeeding paragraph. The Company shall
designate, in the Fundamental Change Company Notice delivered pursuant to
clause (b) of this Section 3.05, whether it will repurchase the Debentures for
cash or shares of Common Stock; provided that the Company will pay cash in lieu
of fractional shares of Common Stock. For purposes of determining the
existence of potential fractional interests, all Debentures subject to
repurchase by the Company held by a Holder shall be considered together (no
matter how many separate

29

 

certificates are to be presented). The Company may
not change its election with respect to the consideration to be paid once the
Company has given its Fundamental Change Company Notice to holders except as
set forth below in the event of a failure to satisfy, prior to the close of
business on the Business Day prior to the Fundamental Change Repurchase Date,
any condition to the payment of the Fundamental Change Repurchase Price in
shares of Common Stock.

     The Company shall, at least three Business Days prior to delivering the
Fundamental Change Company Notice, deliver an Officers’ Certificate to the
Trustee specifying:

          (i) the manner of payment selected by the Company, and

          (ii) if the Company elects to pay the Fundamental Change Repurchase Price
in shares of Common Stock, that the conditions to such manner of payment set
forth in this clause (e) have been or will be complied with.

     The Company’s right to exercise its election to repurchase Debentures
through the issuance of shares of Common Stock shall be conditioned upon:

          (i) the Company’s giving a timely Fundamental Change Company Notice
containing an election to purchase all or a specified percentage of the
Debentures with shares of Common Stock as provided herein;

          (ii) the registration of such shares of Common Stock under the Securities
Act and, if required, the Exchange Act;

          (iii) the listing of such shares of Common Stock on a United States
national securities exchange or the quotation of such shares of Common Stock in
an inter-dealer quotation system of any registered United States national
securities association, in
each case, if the Common Stock is then listed on a national securities
exchange or quoted in an inter-dealer quotation system;

          (iv) any necessary qualification or registration of such shares of Common
Stock under applicable state securities laws or the availability of an
exemption from such qualification and registration; and

          (v) the receipt by the Trustee of an (i) Officers’ Certificate stating
that the terms of the issuance of the shares of Common Stock are in conformity
with this Indenture, (ii) an Opinion of Counsel to the effect that the shares
of Common Stock to be issued by the Company in payment of the Fundamental
Change Repurchase Price in respect of the Debentures have been duly authorized
and, when issued and delivered pursuant to the terms of this Indenture in
payment of the Fundamental Change Repurchase Price in respect of the
Debentures, will be validly issued, fully paid and non-assessable and (iii) an
Officers’ Certificate, stating that the conditions to the issuance of the
shares of Common Stock have been satisfied.

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     Such Officers’ Certificate shall also set forth the number of shares of
Common Stock to be issued for each $1,000 principal amount of Debentures and
the Last Reported Sale Price of a share of Common Stock on each Trading Day
during the period commencing on the fifth Trading Day immediately preceding but
ending on the second Business Day prior to the applicable Fundamental Change
Repurchase Date. If the foregoing conditions are not satisfied prior to the
close of business on the Business Day immediately preceding the Fundamental
Change Repurchase Date and the Company has elected to repurchase the Debentures
through the issuance of shares of Common Stock, the Company shall pay the
entire Fundamental Change Repurchase Price of the Debentures in cash.

     Promptly after determination of the actual number of shares of Common
Stock to be issued upon repurchase of Debentures, the Company shall be required
to disseminate a press release through Dow Jones & Company, Inc. or Bloomberg
Business News containing this information or publish the information on the
Company’s web site or through such other public medium as the Company may use
at that time.

     All shares of Common Stock delivered upon repurchase of the Debentures
shall be duly authorized, validly issued, fully paid and non-assessable.

     If a holder of a repurchased Debenture is paid in shares of Common Stock,
the Company shall pay any documentary, stamp or similar issue or transfer tax
due on such issue of Common Stock. However, the holder shall pay any such tax
which is due because the holder requests the Common Stock to be issued in a
name other than the holder’s name. The Trustee (or other paying agent
appointed by the Company) may refuse to deliver the certificates representing
the shares of Common Stock being issued in a name other than the holder’s name
until the Trustee (or other paying agent appointed by the Company) receives a
sum sufficient to pay any tax which will be due because the shares of Common
Stock are to be issued in a name other than the holder’s name. Nothing herein
shall preclude any income tax withholding required by law or regulations.

Section 3.06 Repurchase of Debentures by the Company at Option of Holders
on Specified Dates. On each of July 15, 2011, July 15, 2014, July 15, 2019,
July 15, 2024 and July 15, 2029 (each, a “Company Repurchase Date”), each
holder shall have the right, at such holder’s option, to require the Company to
repurchase for cash all of such holder’s Debentures, or any portion of the
principal amount thereof that is an integral multiple of $1,000. The Company
shall repurchase such Debentures at a price (the “Company Repurchase Price”)
equal to 100% of the principal amount thereof plus any accrued and unpaid
Interest to but excluding the Company Repurchase Date.

     (a) On
or before the twentieth (20th) Business Day prior to each Company
Repurchase Date, the Company, or at its written request the Trustee in the name
of and at the expense of the Company (which request must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree to
a shorter period), shall mail or cause to be mailed, by first class mail, to
all holders of record on such date a notice (the “Company Repurchase Notice”)
at its last address as the same appears on the Debenture Register,

31

 

and to
beneficial owners as required by applicable law; provided that if the Company
shall give such notice, it shall also give written notice to the Trustee and
Paying Agent, if other than the Trustee, at such time as it is mailed to
Debentureholders. Such notice, if mailed in the manner herein provided, shall
be conclusively presumed to have been duly given, whether or not the holder
receives such notice. Each Company Repurchase Notice shall state, among other
things:

          (i) the Company Repurchase Price, excluding accrued and unpaid Interest,
the applicable Conversion Rate at the time of such notice (and any applicable
adjustments to the Conversion Rate) and, to the extent known at the time of
such notice, the amount of Interest that will be payable with respect to the
Debentures on the Company Repurchase Date;

          (ii) the Company Repurchase Date;

          (iii) the last date on which a holder may exercise the repurchase right;

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

          (v) that Debentures as to which a Company Repurchase Election has been
given by the holder may be converted only if the election has been withdrawn by
the holder in accordance with the terms of this Indenture; provided that the
Debentures are otherwise convertible in accordance with Section 14.01;

          (vi) that the holder shall have the right to withdraw any Debentures
surrendered prior to the close of business on the Business Day immediately
preceding the Company Repurchase Date (or any such later time as may be
required by applicable law);

          (vii) a description of the procedures which a Debentureholder must follow
to exercise such repurchase right or to withdraw any surrendered Debentures;

          (viii) the CUSIP, ISIN or similar number or numbers of the Debentures (if
then generally in use); and

          (ix) briefly, the conversion rights of the Debentures and whether, at the
time of such notice, the Debentures are eligible for conversion.

     No failure of the Company to give the foregoing notices and no defect
therein shall limit the Debentureholders’ repurchase rights or affect the
validity of the proceedings for the repurchase of the Debentures pursuant to
this Section 3.06.

     (b) Debentures shall be repurchased pursuant to this Section 3.06 at the
option of the holder upon:

          (i) delivery to the Trustee (or other Paying Agent appointed by the
Company) by a holder of a duly completed notice (a “Company Repurchase
Election”) in the form set forth on the reverse of the Debenture at any time
from the opening of

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business
on the twentieth (20th) Business Day preceding the
Company Repurchase Date until the close of business on the Business Day
immediately preceding the Company Repurchase Date stating:

               (A) if certificated, the certificate numbers of the Debentures which the
holder shall deliver to be repurchased;

               (B) the portion of the principal amount of the Debentures that the holder
shall deliver to be repurchased, which portion must be $1,000 or an integral
multiple thereof; and

               (C) that such Debentures shall be repurchased as of the Company Repurchase
Date pursuant to the terms and conditions specified in the Debentures and in
the Indenture; and

          (ii) delivery or book-entry transfer of the Debentures to the Trustee (or
other Paying Agent appointed by the Company) at any time after delivery of the
Company Repurchase Election (together with all necessary endorsements) at the
Corporate Trust Office of the Trustee (or other Paying Agent appointed by the
Company) in the Borough of Manhattan, such delivery or transfer being a
condition to receipt by the holder of the Company Repurchase Price therefor;
provided that such Company Repurchase Price shall be so paid pursuant to this
Section 3.06 only if the Debentures so delivered or transferred to the Trustee
(or other Paying Agent appointed by the Company) shall conform in all respects
to the description thereof in the related Company Repurchase Election. All
questions as to the validity, eligibility (including time of receipt) and
acceptance of any Debenture for repurchase shall be determined by the Company,
whose determination shall be final and binding absent manifest error.

     If the Debentures are not in certificated form, holders must provide
notice of their election in accordance with the appropriate procedures of the
Depositary.

Section 3.07 [Reserved].

Section 3.08 Conditions and Procedures for Repurchase at Option of Holders.

     (a) The Company shall repurchase from the holder thereof, pursuant to
Section 3.05 or Section 3.06, a portion of a Debenture, if the principal amount
of such portion is $1,000 or a whole multiple of $1,000. Provisions of this
Indenture that apply to the repurchase of all of a Debenture also apply to the
repurchase of such portion of such Debenture. Upon presentation of any
Debenture repurchased in part only, the Company shall execute and the Trustee
shall authenticate and make available for delivery to the holder thereof, at
the expense of the Company, a new Debenture or Debentures, of any authorized
denomination, in aggregate principal amount equal to the portion of the
Debentures presented not repurchased.

     (b) On or prior to a Repurchase Date, the Company will deposit with the
Trustee or with one or more Paying Agents (or, if the Company is acting as its
own Paying Agent, set aside, segregate and hold in trust as provided in Section
4.04) an amount of money or Common Stock, if permitted hereunder, sufficient to
repurchase on

33

 

the Repurchase Date all the Debentures or portions thereof to be
repurchased on such date at the Repurchase Price; provided that if such deposit
is made on the Repurchase Date it must be received by the Trustee or Paying
Agent, as the case may be, by 11:00 a.m., New York City time, on such date.

     If the Trustee or other Paying Agent appointed by the Company, or the
Company or an Affiliate of the Company, if it or such Affiliate is acting as
the Paying Agent, holds money or Common Stock, if permitted hereunder,
sufficient to pay the aggregate Repurchase Price of all the Debentures or
portions thereof that are to be repurchased on the Repurchase Date, then, on
and after the Business Day following such date (i) such Debentures will cease
to be outstanding, (ii) Interest on such Debentures will cease to accrue
(whether or not book-entry transfer of the Debentures has been made or the
Debentures have been delivered to the Trustee or Paying Agent) and (iii) all
other rights of the holders of such Debentures will terminate (other than the
right to receive the Repurchase Price upon transfer or delivery of the
Debentures).

     (c) Upon receipt by the Trustee (or other Paying Agent appointed by the
Company) of a Repurchase Election, the holder of the Debenture in respect of
which such Repurchase Election was given shall (unless such notice is validly
withdrawn) thereafter be entitled to receive solely the Repurchase Price with
respect to such Debenture. Such Repurchase Price shall be paid to such holder,
subject to receipt of funds and/or Debentures by the Trustee (or other Paying
Agent appointed by the Company), promptly (but in no event more than five (5)
Business Days) following the later of (x) the Repurchase Date with respect to
such Debenture (provided the holder has satisfied the conditions in Section
3.05(c) or Section 3.06(b), as applicable) and (y) the time of book-entry
transfer or delivery of such Debenture to the Trustee (or other Paying Agent
appointed by the Company) by the holder thereof in the manner required by
Section 3.06(a) or Section 3.06(b), as applicable. Debentures in respect of
which a Repurchase Election has been given by the holder thereof may not be
converted pursuant to Article
14 hereof on or after the date of the delivery of such Repurchase Election
unless such notice has first been validly withdrawn.

     (d) Notwithstanding anything herein to the contrary, any holder delivering
to the office of the Trustee (or other Paying Agent appointed by the Company) a
Repurchase Election shall have the right to withdraw such election, in whole or
in part, at any time prior to the close of business on the Business Day
preceding the Repurchase Date (or any such later time as may be required by
applicable law) by delivery of a written notice of withdrawal to the Trustee
(or other Paying Agent appointed by the Company) specifying:

          (i) the principal amount of the Debenture with respect to which such
notice of withdrawal is being submitted,

          (ii) the certificate number, if any, of the Debenture in respect of which
such notice of withdrawal is being submitted, or the appropriate Depositary
information if the Debenture in respect of which such notice of withdrawal is
being submitted is represented by a Global Debenture, and

34

 

          (iii) the principal amount, if any, of such Debenture which remains
subject to the original Repurchase Election and which has been or will be
delivered for repurchase by the Company.

     If the Debentures are not in certificated form, holders must provide
notice of their withdrawal in accordance with the appropriate procedures of the
Depositary.

     The Trustee (or other Paying Agent appointed by the Company) shall
promptly notify the Company of the receipt by it of any Repurchase Election or
written notice of withdrawal thereof.

     If a Repurchase Election is given and then withdrawn pursuant to this
Section 3.08(d) the Company shall have no obligation to purchase the Debentures
listed in such Repurchase Election.

     (e) The Company will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act to the extent then applicable
in connection with the repurchase rights of the holders of Debentures in the
event of a Fundamental Change or on any Company Repurchase Date. If then
required by applicable rules, the Company will file a Schedule TO or any other
schedule required in connection with any offer by the Company to repurchase
Debentures.

     (f) There shall be no repurchase of any Debentures pursuant to Section
3.05 or Section 3.06 if there has occurred at any time prior to, and is
continuing on, the Repurchase Date an Event of Default (other than an Event of
Default that is cured by the payment of the Repurchase Price with respect to
such Debentures). The Paying Agent will promptly return to the respective
holders thereof any Debentures (x) with respect to which a Repurchase Election
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 Repurchase Price with respect to such Debentures) in which
case, upon such return, the Repurchase Election with respect thereto shall be
deemed to have been withdrawn.

     (g) The Trustee (or other Paying Agent appointed by the Company) shall
return to the Company any cash that remains unclaimed as provided in Section
12.03, together with interest, if any, thereon, held by them for the payment of
the Repurchase Price; provided that to the extent that the aggregate amount of
cash deposited by the Company pursuant to Section 3.08(b) exceeds the aggregate
Repurchase Price of the Debentures or portions thereof which the Company is
obligated to purchase as of the Repurchase Date then, unless otherwise agreed
in writing with the Company, promptly after the Business Day following the
Repurchase Date, the Trustee shall return any such excess to the Company
together with interest, if any, thereon.

     (h) In the case of a reclassification, change, consolidation, merger,
binding share exchange, combination, sale or conveyance to which Section 14.07
applies, in which the Common Stock of the Company is changed or exchanged as a
result into the right to receive cash, securities or other property, which
includes shares of Common

35

 

Stock of the Company or shares of common stock of
another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established
automated over-the-counter trading market in the United States and such shares
constitute at the time such change or exchange becomes effective in excess of
50% of the aggregate fair market value of such cash, securities or other
property (as determined by the Company, which determination shall be conclusive
and binding), then the Person formed by such consolidation or resulting from
such merger or which acquires such assets, as the case may be, shall execute
and deliver to the Trustee a supplemental indenture (accompanied by an Opinion
of Counsel that such supplemental indenture complies with the Trust Indenture
Act as in force at the date of execution of such supplemental indenture)
modifying the provisions of this Indenture relating to the right of holders of
the Debentures to cause the Company to repurchase the Debentures following a
Fundamental Change, including without limitation the applicable provisions of
this Article 3 and the definition of Fundamental Change, as appropriate, as
determined in good faith by the Company (which determination shall be
conclusive and binding), to make such provisions apply to such other Person if
different from the Company (in lieu of the Company).

Article 4

Particular Covenants of the Company and the Guarantors

Section 4.01 Payment of Principal and Interest. The Company covenants and
agrees that it will duly and punctually pay or cause to be paid the principal
of (including any Redemption Price or Repurchase Price pursuant to Article 3)
and Interest on each of the Debentures at the places, at the respective times
and in the manner provided herein and in the Debentures.

Section 4.02 Maintenance of Office or Agency.
The Company will maintain an office or agency in the Borough of Manhattan,
The City of New York, where the Debentures may be surrendered for registration
of transfer or exchange or for presentation for payment or for conversion,
redemption or repurchase and where notices and demands to or upon the Company
in respect of the Debentures and this Indenture may be served. The Company
will give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency not designated or appointed by the
Trustee. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office.

     The Company may also from time to time designate co-registrars and one or
more offices or agencies where the Debentures may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations. The Company will give prompt written notice of any such
designation or rescission and of any change in the location of any such other
office or agency.

     The Company hereby initially designates the Trustee as Paying Agent,
Debenture Registrar, Custodian, Bid Solicitation Agent and Conversion Agent,
and each of the Corporate Trust Office and the office of agency of the Trustee
in the Borough of

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Manhattan shall be considered as one such office or agency of
the Company for each of the aforesaid purposes.

     So long as the Trustee is the Debenture Registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 7.10 and the
third paragraph of Section 7.11. If co-registrars have been appointed in
accordance with this Section, the Trustee shall mail such notices only to the
Company and the holders of Debentures it can identify from its records.

     Section 4.03 Appointments to Fill Vacancies in Trustee’s Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so
that there shall at all times be a Trustee hereunder.

Section 4.04 Provisions as to Paying Agent.

     (a) If the Company shall appoint a Paying Agent other than the Trustee, or
if the Trustee shall appoint such a Paying Agent, the Company will cause such
Paying Agent to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 4.04:

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

          (ii) that it will give the Trustee notice of any failure by the Company
(or by any other obligor on the Debentures) to make any payment of the
principal of or Interest on the Debentures when the same shall be due and
payable; and

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

     The Company shall, on or before each due date of the principal of or
Interest on the Debentures, deposit with the Paying Agent a sum (in funds which
are immediately available on the due date for such payment) sufficient to pay
such principal or Interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of any failure to take such action;
provided that if such deposit is made on the due date, such deposit shall be
received by the Paying Agent by 11:00 a.m., New York City time, on such date.

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

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     (c) Anything in this Section 4.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid
to the Trustee all sums held in trust by the Company or any Paying Agent
hereunder as required by this Section 4.04, such sums to be held by the Trustee
upon the trusts herein contained and upon such payment by the Company or any
Paying Agent to the Trustee, the Company or such Paying Agent shall be released
from all further liability with respect to such sums.

     (d) Anything in this Section 4.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 4.04 is subject to
Section 12.02 and Section 12.03.

     The Trustee shall not be responsible for the actions of any other Paying
Agents (including the Company if acting as its own Paying Agent) and shall have
no control of any funds held by such other Paying Agents.

Section 4.05 Existence. Subject to Article 11, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided that the
Company shall not be required to preserve any such right if the Company shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of the Company and that the loss thereof is not disadvantageous
in any material respect to the Debentureholders.

Section 4.06 Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not
subject to Section 13 or 15(d) under the Exchange Act, make available to any
holder or beneficial holder of Debentures or any Common Stock issued upon
conversion thereof which continue to be Restricted Securities in connection
with any sale thereof and any prospective purchaser of Debentures or such
Common Stock designated by such holder or beneficial holder, the information
required pursuant to Rule 144A(d)(4) under the Securities Act upon the request
of any holder or beneficial holder of the Debentures or such Common Stock and
it will take such further action as any holder or beneficial holder of such
Debentures or such Common Stock may reasonably request, all to the extent
required from time to time to enable such holder or beneficial holder to sell
its Debentures or Common Stock without registration under the Securities Act
within the limitation of the exemption provided by Rule 144A, as such Rule may
be amended from time to time. Upon the request of any holder or any beneficial
holder of the Debentures or such Common Stock, the Company will deliver to such
holder a written statement as to whether it has complied with such
requirements.

Section 4.07 Stay, Extension and Usury Laws. The Company and each
Guarantor covenant (to the extent that they may lawfully do so) that they shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law
which would prohibit or forgive the Company or any Guarantor from paying all or
any portion of the principal of or Interest on the

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Debentures as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture and the Company and
each Guarantor (to the extent they may lawfully do so) hereby expressly waive
all benefit or advantage of any such law, and covenant that they will not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

Section 4.08 Compliance Certificate. The Company shall deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company (which fiscal year of the Company is presently the twelve
calendar months ending December 31), a certificate signed by either the
principal executive officer, principal financial officer or principal
accounting officer of the Company, stating whether or not to the best knowledge
of the signer 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 the status thereof of which the signer may have
knowledge.

     The Company will deliver to the Trustee, promptly upon becoming aware of
(i) any default in the performance or observance of any covenant, agreement or
condition contained in this Indenture, or (ii) any Event of Default, an
Officers’ Certificate specifying with particularity such default or Event of
Default and further stating what action the Company has taken, is taking or
proposes to take with respect thereto.

     Any notice required to be given under this Section 4.08 shall be delivered
to a Responsible Officer of the Trustee at its Corporate Trust Office.

Section 4.09 Additional Amounts Notice. In the event that the Company is
required to pay Additional Amounts to holders of Debentures pursuant to the
Registration Rights Agreement, the Company will provide written notice
(“Additional Amounts Notice”) to the Trustee of its obligation to pay
Additional Amounts no later than fifteen (15) days prior to the proposed
payment date for the Additional Amounts, and the Additional Amounts Notice
shall set forth the amount of Additional Amounts to be paid by the Company on
such payment date. The Trustee shall not at any time be under any duty or
responsibility to any holder of Debentures to determine the Additional Amounts,
or with respect to the nature, extent or calculation of the amount of
Additional Amounts when made, or with respect to the method employed in such
calculation of the Additional Amounts.

Section 4.10 Contingent Debt Tax Treatment. The Company agrees and, by
acceptance of a Debenture, each beneficial holder of a Debenture will be deemed
to have agreed to treat the Debentures as indebtedness of the Company for U.S.
federal income tax purposes that are subject to the regulations governing
contingent payment debt instruments and to be bound (in the absence of an
administrative determination or judicial ruling to the contrary) by the
Company’s determination of the comparable yield and projected payment schedule
within the meaning of the regulations governing contingent

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payment debt
instruments. A holder of Debentures may obtain the amount of original issue
discount, issue date, yield to maturity, comparable yield and projected payment
schedule for the Debentures, determined by the Company pursuant to Treas. Reg.
Sec. 1.1275-4, by submitting a written request for it to the Company at the
following address: CapitalSource Inc., 445 Willard Avenue, 12th Floor, Chevy
Chase, Maryland, 20815, Telecopier No.: 301-841-2375, Attention: Chief
Financial Officer.

Section 4.11 Calculation of Original Issue Discount. The Company shall
file with the Trustee promptly at the end of each calendar year (i) a written
notice specifying the amount of Tax Original Issue Discount (including daily
rates and accrual periods) accrued on outstanding Debentures as of the end of
such year and (ii) such other specific information relating to such Tax
Original Issue Discount as may then be required under the Internal Revenue Code
of 1986, as amended from time to time, or the Treasury regulations promulgated
thereunder.

Article 5

Debentureholders’ Lists and Reports by the Company and the Trustee

Section 5.01 Debentureholders’ Lists. The Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee, semiannually, not
more than fifteen (15) days after each January 1 and July 1 in each year
beginning with January 1, 2005, and at such other times as the Trustee may
request in writing, within thirty (30) days after receipt by the Company of any
such request (or such lesser time as the Trustee may reasonably request in
order to enable it to timely provide any notice to be provided by it
hereunder), a list in such form as the Trustee may reasonably require of the
names and addresses of the holders of Debentures as of a date not more than
fifteen (15) days (or such other date as the Trustee may reasonably request in
order to so provide any such notices) prior to the time such information is
furnished, except that no such list need be furnished by the Company to the
Trustee so long as the Trustee is acting as the sole Debenture Registrar.

Section 5.02 Preservation and Disclosure of Lists.

     (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures contained in the most recent list furnished to it as provided in
Section 5.01 or maintained by the Trustee in its capacity as Debenture
Registrar or co-registrar in respect of the Debentures, if so acting. The
Trustee may destroy any list furnished to it as provided in Section 5.01 upon
receipt of a new list so furnished.

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

     (c) Every Debentureholder, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of

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either of them shall be held accountable by reason of any disclosure
of information as to names and addresses of holders of Debentures made pursuant
to the Trust Indenture Act.

Section 5.03 Reports by Trustee.

     (a) Within sixty (60) days after May 15 of each year commencing with the
year 2005, the Trustee shall transmit to holders of Debentures such reports
dated as of May 15 of the year in which such reports are made concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
In the event that no events have occurred under the applicable sections of the
Trust Indenture Act, the Trustee shall be under no duty or obligation to
provide such reports.

     (b) A copy of such report shall, at the time of such transmission to
holders of Debentures, be filed by the Trustee with each stock exchange and
automated quotation
system upon which the Debentures are listed and with the Company. The
Company will promptly notify the Trustee in writing when the Debentures are
listed on any stock exchange or automated quotation system or delisted
therefrom.

Section 5.04 Reports by Company. The Company shall file with the Trustee
(and the Commission if at any time after the Indenture becomes qualified under
the Trust Indenture Act), and transmit to holders of Debentures, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act, whether or not the Debentures are governed by
such Act; provided that any such information, documents or reports required to
be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act shall be filed with the Trustee within fifteen (15) days after the same is
so required to be filed with the Commission. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee’s receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company’s compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers’
Certificates).

Article 6

Remedies of the Trustee and Debentureholders on an Event of Default

Section 6.01 Events of Default. In case one or more of the following
events (each, an “Event of Default”) (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) shall
have occurred and be continuing:

     (a) default in the payment of the principal of any of the Debentures as
and when the same shall become due and payable either at Stated Maturity or
otherwise; or

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     (b) default in the payment of any installment of Interest upon any of the
Debentures as and when the same shall become due and payable, and continuance
of such default for a period of thirty (30) days; or

     (c) failure to provide notice of the occurrence of a Fundamental Change on
a timely basis as required by Section 3.05; or

     (d) default in the Company’s obligation to convert the Debentures into
Common Stock or cash upon the exercise of a holder’s rights pursuant to Article
14 and continuation of such default for a period of ten (10) days; or

     (e) default in the Company’s obligation to repurchase the Debentures at
the option of a holder upon a Fundamental Change pursuant to Section 3.05 or on
specified dates pursuant to Section 3.06; or

     (f) default in the Company’s obligation to redeem the Debentures after it
has exercised its option to redeem; or

     (g) the assertion in writing by any Guarantor or by the Company that a
Guarantee is not, in full force and effect; or

     (h) failure on the part of the Company or any Guarantor duly to observe or
perform any other of the covenants or agreements on the part of the Company or
such Guarantor in the Debentures or in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in this
Section 6.01 specifically dealt with) continued for a period of sixty (60) days
after the date on which written notice of such failure, requiring the Company
or such Guarantor to remedy the same, shall have been given to the Company or
any Guarantor by the Trustee, or to the Company or any Guarantor and a
Responsible Officer of the Trustee by the holders of at least twenty-five
percent (25%) in aggregate principal amount of the Debentures at the time
outstanding determined in accordance with Section 8.04; or

     (i) default with respect to the Company’s or any of its Significant
Subsidiaries’ indebtedness having a principal amount then outstanding,
individually or in the aggregate, of at least $25.0 million, whether such
indebtedness now exists or is hereafter incurred, which default or defaults:

          (i) shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable and such acceleration shall not have been rescinded or annulled
within 60 days after the date of such acceleration; or

          (ii) shall constitute the failure to pay such indebtedness at the final
stated maturity thereof (after expiration of any applicable grace period); or

     (j) rendering of any final judgment or judgments for the payment of money
in excess of $25.0 million against the Company that is not discharged for any
period of sixty (60) consecutive days during which a stay of enforcement shall
not be in effect; or

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     (k) commencement by the Company of a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to the Company
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of the Company or any
substantial part of the property of the Company, or consent by the Company to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against the
Company or general assignment by the Company for the benefit of creditors, or
failure of the Company generally to pay its debts as they become due; or

     (l) commencement of an involuntary case or other proceeding against the
Company seeking liquidation, reorganization or other relief with respect to the
Company or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of the Company or any
substantial part of the property of the Company and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of sixty
(60) consecutive days;

     then, and in each and every such case (other than an Event of Default
specified in Section 6.01(k) or 6.01(l), unless the principal of all of the
Debentures shall have already become due and payable, either the Trustee or the
holders of not less than twenty-five percent (25%) in aggregate principal
amount of the Debentures then outstanding hereunder determined in accordance
with Section 8.04, by notice in writing to the Company (and to the Trustee if
given by Debentureholders), may declare the principal of all the Debentures and
any Interest accrued thereon to be due and payable immediately, and upon any
such declaration the same shall become and shall be immediately due and
payable, anything in this Indenture or in the Debentures contained to the
contrary notwithstanding. If an Event of Default specified in Section 6.01(k)
or Section 6.01(l) occurs, the principal of all the Debentures and any Interest
accrued thereon shall be immediately and automatically due and payable without
necessity of further action. This provision, however, is subject to the
conditions that if, at any time after the principal of the Debentures shall
have been so declared due and payable, and before any judgment or decree for
the payment of the monies due shall have been obtained or entered as
hereinafter provided, the Company shall pay or shall deposit with the Trustee a
sum sufficient to pay all matured installments of Interest upon all Debentures
and the principal of any and all Debentures which shall have become due
otherwise than by acceleration (with interest on overdue installments of
Interest (to the extent that payment of such interest is enforceable under
applicable law) and on such principal at the rate borne by the Debentures, to
the date of such payment or deposit) and amounts due to the Trustee pursuant to
Section 7.06, and if any and all defaults under this Indenture, other than the
nonpayment of principal of and accrued Interest on Debentures which shall have
become due by acceleration, shall have been cured or waived pursuant to Section
6.07, then and in every such case the holders of a majority in aggregate
principal amount of the Debentures then outstanding, by written notice to the
Company and to the Trustee, may waive all defaults or Events of Default and
rescind and annul such declaration and its consequences; but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or Event of Default, or shall impair any right consequent

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thereon. The Company
shall notify in writing a Responsible Officer of the Trustee, promptly upon
becoming aware thereof, of any Event of Default.

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

Section 6.02 Payments of Debentures on Default; Suit Therefor. The
Company covenants that (a) in case default shall be made in the payment of any
installment of Interest upon any of the Debentures as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty (30) days, or (b) in case default shall be made in the payment of the
principal of any of the Debentures as and when the same shall have become due
and payable, whether at maturity of the Debentures or in connection with any
redemption, repurchase, acceleration, declaration or otherwise, then, upon
demand of the Trustee, the Company, or the Guarantors, in accordance with
Article 15, will pay to the Trustee, for the benefit of the holders of the
Debentures, the whole amount that then shall have become due and payable on all
such Debentures for principal or Interest, as the case may be, with interest
upon the overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) upon the overdue installments of Interest at
the rate borne by the Debentures, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
all other amounts due the Trustee under Section 7.06. Until such demand by the
Trustee, the Company may pay the principal of and Interest on the Debentures to
the registered holders, whether or not the Debentures are overdue.

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

     In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Debentures under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company,
or such other obligor, or in the case of any other judicial proceedings
relative to the Company or such other obligor upon the Debentures, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of

44

 

whether the principal of the Debentures shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 6.02, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal and Interest owing and unpaid in respect of the Debentures,
and, in case of any judicial proceedings, to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and of the Debentureholders allowed in such judicial
proceedings relative to the Company, or any other obligor on the Debentures,
its or their
creditors, or its or their property, and to collect and receive any monies
or other property payable or deliverable on any such claims, and to distribute
the same after the deduction of any amounts due the Trustee under Section 7.06,
and to take any other action with respect to such claims, including
participating as a member of any official committee of creditors, as it
reasonably deems necessary or advisable, and, unless prohibited by law or
applicable regulations, and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official is hereby authorized
by each of the Debentureholders 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 Debentureholders, to pay to the Trustee any amount due it for
reasonable compensation, expenses, advances and disbursements, including
counsel fees and expenses incurred by it up to the date of such distribution.
To the extent that such payment of reasonable compensation, expenses, advances
and disbursements out of the estate in any such proceedings shall be denied for
any reason, payment of the same shall be secured by a lien on, and shall be
paid out of, any and all distributions, dividends, monies, securities and other
property which the holders of the Debentures may be entitled to receive in such
proceedings, whether in liquidation or under any plan of reorganization or
arrangement or otherwise.

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

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

Section 6.03 Application of Monies Collected by Trustee. Any monies or
other property collected by the Trustee pursuant to this Article 6, or any
monies or other property otherwise distributable in respect of the Company’s
obligations under this Indenture, shall be applied in the order following, at
the date or dates fixed by the Trustee for the distribution of such monies,
upon presentation of the several Debentures, and stamping thereon the payment,
if only partially paid, and upon surrender thereof, if fully paid:

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     FIRST: To the payment of all amounts due the Trustee (including any
predecessor Trustee) under Section 7.06;

     SECOND: In case the principal of the outstanding Debentures shall not have
become due and be unpaid, to the payment of Interest on the Debentures in
default in the order of the maturity of the installments of such Interest, with
interest (to the extent that such interest has been collected by the Trustee)
upon the overdue installments of Interest
at the rate borne by the Debentures, such payments to be made ratably to
the Persons entitled thereto;

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

     FOURTH: To the payment of the remainder, if any, to the Company, any
Guarantor, or any other Person lawfully entitled thereto.

Section 6.04 Proceedings by Debentureholder. No holder of any Debenture
shall have any right by virtue of or by reference to any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof,
as hereinbefore provided, and unless also the holders of not less than
twenty-five percent (25%) in aggregate principal amount of the Debentures then
outstanding shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable security or indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Trustee for sixty (60) days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding and no direction inconsistent with such written
request shall have been given to the Trustee pursuant to Section 6.07; it being
understood and intended, and being expressly covenanted by the taker and holder
of every Debenture with every other taker and holder and the Trustee, that no
one or more holders of Debentures shall have any right in any manner whatever
by virtue of or by reference to any provision of this Indenture to affect,
disturb or prejudice the rights of any other holder of Debentures, or to obtain
or seek to obtain priority over or preference to any other such holder, or to
enforce any right under this Indenture, except in the manner herein provided
and for the equal, ratable and common benefit of all holders of

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Debentures
(except as otherwise provided herein). For the protection and enforcement of
this Section 6.04, each and every Debentureholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.

     Notwithstanding any other provision of this Indenture and any provision of
any Debenture, the right of any holder of any Debenture to receive payment of
the principal
of (including any Redemption Price or Repurchase Price pursuant to Article
3) and accrued Interest on such Debenture on or after the respective due dates
expressed in such Debenture, or to institute suit for the enforcement of any
such payment on or after such respective dates against the Company or any
Guarantor, shall not be impaired or affected without the consent of such
holder.

     Anything in this Indenture or the Debentures to the contrary
notwithstanding, the holder of any Debenture, without the consent of either the
Trustee or the holder of any other Debenture, in its own behalf and for its own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, its rights of conversion as provided herein.

Section 6.05 Proceedings by Trustee. In case of an Event of Default, the
Trustee may, in its discretion, proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as are
necessary to protect and enforce any of such rights, either by suit in equity
or by action at law or by proceeding in bankruptcy or otherwise, whether for
the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.

Section 6.06 Remedies Cumulative and Continuing. Except as provided in
Section 2.06, all powers and remedies given by this Article 6 to the Trustee or
to the Debentureholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Debentures, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Debentures to exercise any right
or power accruing upon any default or Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be
a waiver of any such default or any acquiescence therein, and, subject to the
provisions of Section 6.04, every power and remedy given by this Article 6 or
by law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.

Section 6.07 Direction of Proceedings and Waiver of Defaults by Majority
of Debentureholders. Upon provision of indemnity reasonably satisfactory to
the Trustee, the holders of a majority in aggregate principal amount of the
Debentures at the time outstanding determined in accordance with Section 8.04
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided that (a) such

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direction shall not be
in conflict with any rule of law or with this Indenture, (b) the Trustee may
take any other action which is not inconsistent with such direction and (c) the
Trustee
may decline to take any action that would benefit some Debentureholders to
the detriment of other Debentureholders. The holders of a majority in
aggregate principal amount of the Debentures at the time outstanding determined
in accordance with Section 8.04 may, on behalf of the holders of all of the
Debentures, waive any past default or Event of Default hereunder and its
consequences except (i) a default in the payment of Interest on, or the
principal of, the Debentures, (ii) a failure by the Company to convert any
Debentures into Common Stock or cash, (iii) a default in the payment of the
Redemption Price pursuant to Section 3.03, (iv) a default in the payment of the
Fundamental Change Repurchase Price pursuant to Section 3.05 or Company
Repurchase Price pursuant to Section 3.06 or (v) a default in respect of a
covenant or provision hereof which under Article 10 cannot be modified or
amended without the consent of the holders of each or all Debentures then
outstanding or affected thereby. Upon any such waiver, the Company, the
Guarantors, the Trustee and the holders of the Debentures shall be restored to
their former positions and rights hereunder; but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon. Whenever any default or Event of Default hereunder shall
have been waived as permitted by this Section 6.07, said default or Event of
Default shall for all purposes of the Debentures and this Indenture be deemed
to have been cured and to be not continuing; but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.

Section 6.08 Notice of Defaults. The Trustee shall, within ninety (90)
days after a Responsible Officer of the Trustee has knowledge of the occurrence
of a default, mail to all Debentureholders, as the names and addresses of such
holders appear upon the Debenture Register, notice of all defaults known to a
Responsible Officer, unless such defaults shall have been cured or waived
before the giving of such notice; provided that except in the case of default
in the payment of the principal of or Interest on any of the Debentures, the
Trustee shall be protected in withholding such notice if and so long as a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interests of the
Debentureholders. For the purpose of this Section 6.08, the term “default”
means any event which is, or after notice or lapse of time or both would
become, an Event of Default.

Section 6.09 Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Debenture by its acceptance thereof shall be
deemed to have agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys’ fees and expenses, against any party litigant
in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided that the provisions of this
Section 6.09 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Debentureholder, or
group of
Debentureholders, holding in the aggregate more than ten percent in
principal amount of the Debentures at the time outstanding determined in

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accordance with Section 8.04, or to any suit instituted by any Debentureholder
for the enforcement of the payment of the principal of or Interest on any
Debenture on or after the due date expressed in such Debenture or to any suit
for the enforcement of the right to convert any Debenture in accordance with
the provisions of Article 14.

Article 7

The Trustee

Section 7.01 Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture. In case an Event
of Default has occurred (which has not been cured or waived), the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person’s own
affairs.

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

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

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

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

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

     (c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
holders of not less than a majority in principal amount of the Debentures at
the time outstanding determined
as provided in Section 8.04 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture;

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     (d) the Trustee shall not be liable in respect of any payment (as to the
correctness of amount, entitlement to receive or any other matters relating to
payment) or notice effected by the Company or any Paying Agent or any records
maintained by any co-registrar with respect to the Debentures; and

     (e) if any party fails to deliver a notice relating to an event the fact
of which, pursuant to this Indenture, requires notice to be sent to the
Trustee, the Trustee may conclusively rely on its failure to receive such
notice as reason to act as if no such event occurred.

     The Trustee shall not be deemed to have knowledge or notice of any default
(as defined in Section 6.08) or Event of Default hereunder unless a Responsible
Officer of the Trustee shall have received at the Corporate Trust Office
written notice of such default or Event of Default from the Company or the
holders of at least 10% in aggregate principal amount of the Debentures and
such notice refers to such default or Event of Default, the Debentures and the
Indenture.

     None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers.

     Whether or not therein provided, every provision of this Indenture
relating to the conduct or affecting the liability of, or affording protection
to, the Trustee shall be subject to the provisions of this Section 7.01.

Section 7.02 Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 7.01:

     (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, consent, order, bond, debenture, note, coupon
or other paper or document (whether in its original or facsimile form) believed
by it in good faith to be genuine and to have been signed or presented by the
proper party or parties;

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

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

     (d) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Debentureholders pursuant to the provisions of this Indenture,
unless such

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Debentureholders shall have offered to the Trustee reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby;

     (e) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document, but the Trustee may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company or any
Guarantor, personally or by agent or attorney; and

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

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

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

     (i) the Trustee may request that the Company or any Guarantor 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; and

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

Section 7.03 No Responsibility for Recitals, Etc. The recitals contained
herein and in the Debentures (except in the Trustee’s certificate of
authentication) shall be taken as the statements of the Company and the
Guarantors, as the case may be, and the Trustee assumes no responsibility
for the correctness of the same. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Debentures. The
Trustee shall not be accountable for the use or application by the Company of
any Debentures or the proceeds of any Debentures authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.

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Section 7.04 Trustee, Paying Agents, Bid Solicitation Agents, Conversion
Agents or Registrar May Own Debentures. The Trustee, any Paying Agent, any Bid
Solicitation Agent, any Conversion Agent or Debenture Registrar, in its
individual or any other capacity, may become the owner or pledgee of Debentures
with the same rights it would have if it were not Trustee, Paying Agent, Bid
Solicitation Agent, Conversion Agent or Debenture Registrar.

Section 7.05 Monies to Be Held in Trust. Subject to the provisions of
Section 12.03, all monies received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received. Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
may be agreed in writing from time to time by the Company and the Trustee.

Section 7.06 Compensation and Expenses of Trustee. The Company covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, such compensation for all services rendered by it hereunder in any
capacity (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) as mutually agreed to from time
to time in writing between the Company and the Trustee, and the Company will
pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence, willful misconduct or
bad faith. The Company also covenants to indemnify the Trustee and any
predecessor Trustee (or any officer, director or employee of the Trustee), in
any capacity under this Indenture and its agents and any authenticating agent
for, and to hold them harmless against, any and all loss, liability, damage,
claim or expense including taxes (other than taxes based on the income of the
Trustee) incurred without negligence, willful misconduct or bad faith on the
part of the Trustee or such officers, directors, employees and agent or
authenticating agent, as the case may be, and arising out of or in connection
with the acceptance or administration of this trust or in any other capacity
hereunder, including the costs and expenses (including reasonable attorneys’
fees and expenses) of defending themselves against any claim (whether asserted
by the Company, any Guarantor, any holder or any other Person) of liability in
connection with the exercise or
performance of any of its powers or duties hereunder. The obligations of
the Company under this Section 7.06 to compensate or indemnify the Trustee and
to pay or reimburse the Trustee for expenses (including reasonable attorneys’
fees and expenses), disbursements and advances shall be secured by a lien prior
to that of the Debentures upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the holders of
particular Debentures. The obligation of the Company under this Section 7.06
shall survive the resignation or removal of the Trustee and the satisfaction
and discharge or termination of this Indenture.

     When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
6.01(k) or Section 6.01(l)

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with respect to the Company, any Guarantor or any
Significant Subsidiary occurs, the expenses (including reasonable attorneys’
fees and expenses) and the compensation for the services are intended to
constitute expenses of administration under any bankruptcy, insolvency or
similar laws.

Section 7.07 Officers’ Certificate as Evidence. Except as otherwise
provided in Section 7.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of bad faith or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers’ Certificate delivered to the Trustee.

Section 7.08 Conflicting Interests of Trustee. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.

Section 7.09 Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a Person that is eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and surplus of at
least $50,000,000 (or if such Person is a member of a bank holding company
system, its bank holding company shall have a combined capital and surplus of
at least $50,000,000). If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of any supervising or
examining authority, then for the purposes of this Section the combined capital
and surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.09, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.

Section 7.10 Resignation or Removal of Trustee.

     (a) The Trustee may at any time resign by giving written notice of such
resignation to the Company and to the holders of Debentures. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
trustee by written instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment sixty (60) days after the
mailing of such notice of resignation to the Debentureholders, the resigning
Trustee may, upon ten (10) Business Days’ notice to the Company and the
Debentureholders, appoint a successor identified in such notice or may
petition, at the expense of the Company, any court of competent jurisdiction
for the appointment of a successor trustee, or, if any Debentureholder who has
been a bona fide holder of a Debenture or Debentures for at least six (6)
months may, subject to the provisions of Section 6.09, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.

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

          (i) the Trustee shall fail to comply with Section 7.08 after written
request therefor by the Company or by any Debentureholder who has been a bona
fide holder of a Debenture or Debentures for at least six (6) months; or

          (ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 7.09 and shall fail to resign after written request
therefor by the Company or by any such Debentureholder; or

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

     then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 6.09, any Debentureholder who has been a bona fide holder
of a Debenture or Debentures for at least six (6) months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee; provided that if no successor Trustee shall have been appointed and
have accepted appointment sixty (60) days after either the Company or the
Debentureholders has removed the Trustee, or the Trustee resigns, the Trustee
so removed may petition, at the expense of the Company, any court of competent
jurisdiction for an appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.

     (c) The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless, within ten (10) days after notice to the Company of such
nomination, the Company objects thereto, in which case the Trustee so removed
or any Debentureholder, or if such Trustee so removed or any Debentureholder
fails to act, the Company, upon the terms and conditions and otherwise as in
Section 7.10 provided, may petition any court of competent jurisdiction for an
appointment of a successor trustee.

     (d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 7.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 7.11.

Section 7.11 Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 7.10 shall execute, acknowledge and deliver to
the Company, to the Guarantors, and to its predecessor trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor trustee shall

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become effective and such successor trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as trustee herein; but, nevertheless, on the
written request of the Company or of the successor trustee, the trustee ceasing
to act shall, upon payment of any amount then due it pursuant to the provisions
of Section 7.06, execute and deliver an instrument transferring to such
successor trustee all the rights and powers of the trustee so ceasing to act.
Upon request of any such successor trustee, the Company and the Guarantors
shall execute any and all instruments in writing for more fully and certainly
vesting in and confirming to such successor trustee all such rights and powers.
Any trustee ceasing to act shall, nevertheless, retain a lien upon all
property and funds held or collected by such trustee as such, except for funds
held in trust for the benefit of holders of particular Debentures, to secure
any amounts then due it pursuant to the provisions of Section 7.06.

     No successor trustee shall accept appointment as provided in this Section
7.11 unless, at the time of such acceptance, such successor trustee shall be
qualified under the provisions of Section 7.08 and be eligible under the
provisions of Section 7.09.

     Upon acceptance of appointment by a successor trustee as provided in this
Section 7.11, the Company (or the former trustee, at the written direction of
the Company) shall mail or cause to be mailed notice of the succession of such
trustee hereunder to the holders of Debentures at their addresses as they shall
appear on the Debenture Register. If the Company fails to mail such notice
within ten (10) days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of
the Company.

Section 7.12 Succession by Merger.
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding
to all or substantially all of the corporate trust business of the Trustee
(including any trust created by this Indenture), shall be the successor to the
Trustee hereunder without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided that in the case of any
Person succeeding to all or substantially all of the corporate trust business
of the Trustee, such Person shall be qualified under the provisions of Section
7.08 and eligible under the provisions of Section 7.09.

     In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor trustee or authenticating
agent appointed by such predecessor trustee, and deliver such Debentures so
authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee or any authenticating agent
appointed by such successor trustee may authenticate such Debentures in the
name of the successor trustee; and in all such cases such certificates shall
have the full force that is provided in the Debentures or in this Indenture;
provided that the right to adopt the certificate of authentication of any
predecessor Trustee or authenticate Debentures in the

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name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion
or consolidation.

Section 7.13 Preferential Collection of Claims. If and when the Trustee
shall be or become a creditor of the Company (or any other obligor upon the
Debentures), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company or the
Guarantors (or any such other obligor).

Article 8

The Debentureholders

Section 8.01 Action by Debentureholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any
demand or request, the giving of any notice, consent or waiver or the taking of
any other action), the fact that at the time of taking any such action, the
holders of such specified percentage have joined therein may be evidenced (a)
by any instrument or any number of instruments of similar tenor executed by
Debentureholders in person or by agent or proxy appointed in writing, or (b) by
the record of the holders of Debentures voting in favor thereof at any meeting
of Debentureholders duly called and held in accordance with the provisions of
Article 9, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Debentureholders. Whenever the Company or the
Trustee solicits the taking of any action by the holders of the Debentures, the
Company or the Trustee may fix in
advance of such solicitation, a date as the Record Date for determining
holders entitled to take such action. The Record Date shall be not more than
fifteen (15) days prior to the date of commencement of solicitation of such
action.

Section 8.02 Proof of Execution by Debentureholders. Subject to the
provisions of Section 7.01, Section 7.02 and Section 9.05, proof of the
execution of any instrument by a Debentureholder or its agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The holding of Debentures shall be proved by the registry of such
Debentures or by a certificate of the Debenture Registrar.

     The record of any Debentureholders’ meeting shall be proved in the manner
provided in Section 9.06.

Section 8.03 Who Are Deemed Absolute Owners. The Company, the Guarantors,
the Trustee, any Paying Agent, any Conversion Agent and any Debenture Registrar
may deem the Person in whose name such Debenture shall be registered upon the
Debenture Register to be, and may treat it as, the absolute owner of such
Debenture (whether or not such Debenture shall be overdue and notwithstanding
any notation of ownership or other writing thereon made by any Person other
than the Company or any Debenture Registrar) for the purpose of receiving
payment of or on account of the principal of and Interest on such Debenture,
for conversion of such Debenture and for all other purposes; and neither the
Company, nor the Guarantors, nor the Trustee nor any Paying Agent nor any

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Conversion Agent nor any Debenture Registrar shall be affected by any notice to
the contrary. All such payments so made to any holder for the time being, or
upon his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Debenture.

Section 8.04 Company-owned Debentures Disregarded. In determining whether
the holders of the requisite aggregate principal amount of Debentures have
concurred in any direction, consent, waiver or other action under this
Indenture, Debentures which are owned by the Company, the Guarantors or any
other obligor on the Debentures or any Affiliate of the Company, the Guarantors
or any other obligor on the Debentures shall be disregarded and deemed not to
be outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Trustee shall be protected in relying on
any such direction, consent, waiver or other action, only Debentures which a
Responsible Officer knows are so owned shall be so disregarded. Debentures so
owned which have been pledged in good faith may be regarded as outstanding for
the purposes of this Section 8.04 if the pledgee shall establish to the
satisfaction of the Trustee the pledgee’s right to vote such Debentures and
that the pledgee is not the Company, any other obligor on the Debentures or any
Affiliate of the Company, the Guarantors or any such other obligor. In the
case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall
be full protection to the Trustee. Upon request of the Trustee, the Company or
any Guarantor shall furnish to the Trustee promptly an Officers’ Certificate
listing and identifying all Debentures, if any, known by the Company or any
Guarantor, as the case may be, to be owned or held by or for the account of any
of the above described Persons, and, subject to Section 7.01, the Trustee shall
be entitled to accept such Officers’ Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Debentures not listed therein
are outstanding for the purpose of any such determination.

Section 8.05 Revocation of Consents, Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
8.01, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Debentures specified in this Indenture in connection
with such action, any holder of a Debenture which is shown by the evidence to
be included in the Debentures the holders of which have consented to such
action may, by filing written notice with the Trustee at its Corporate Trust
Office and upon proof of holding as provided in Section 8.02, revoke such
action so far as concerns such Debenture. Except as aforesaid, any such action
taken by the holder of any Debenture shall be conclusive and binding upon such
holder and upon all future holders and owners of such Debenture and of any
Debentures issued in exchange or substitution therefor, irrespective of whether
any notation in regard thereto is made upon such Debenture or any Debenture
issued in exchange or substitution therefor.

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Article 9

Meetings of Debentureholders

Section 9.01 Purpose of Meetings. A meeting of Debentureholders may be called
at any time and from time to time pursuant to the provisions of this Article 9
for any of the following purposes:

     (a) to give any notice to the Company, the Guarantors or to the Trustee or
to give any directions to the Trustee permitted under this Indenture, or to
consent to the waiving of any default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by
Debentureholders pursuant to any of the provisions of Article 6;

     (b) to remove the Trustee and nominate a successor trustee pursuant to the
provisions of Article 7;

     (c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 10.02; or

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

Section 9.02 Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Debentureholders to take any action specified in Section
9.01, to be held at such time and at such place as the Trustee shall determine.
Notice of every meeting of the Debentureholders, setting forth the time and
the place of such meeting and in general terms the action proposed to be taken
at such meeting and the establishment of any Record Date pursuant to Section
8.01, shall be mailed to holders of Debentures at their addresses as they shall
appear on the Debenture Register. Such notice shall also be mailed by the
Trustee to the Company. Such notices shall be mailed not less than twenty (20)
nor more than ninety (90) days prior to the date fixed for the meeting.

     Any meeting of Debentureholders shall be valid without notice if the
holders of all Debentures then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all
Debentures outstanding, and if the Company and the Trustee are either present
by duly authorized representatives or have, before or after the meeting, waived
notice.

Section 9.03 Call of Meetings by Company or Debentureholders. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or
the holders of at least ten percent (10%) in aggregate principal amount of the
Debentures then outstanding, shall have requested the Trustee to call a meeting
of Debentureholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within twenty (20) days after receipt of such
request, then the Company or such Debentureholders may determine the time and
the place for such meeting and may call such meeting to take any action
authorized in Section 9.01, by mailing notice thereof as provided in Section
9.02.

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Section 9.04 Qualifications for Voting. To be entitled to vote at any
meeting of Debentureholders a person shall (a) be a holder of one or more
Debentures on the Record Date pertaining to such meeting or (b) be a person
appointed by an instrument in writing as proxy by a holder of one or more
Debentures on the Record Date pertaining to such meeting. The only persons who
shall be entitled to be present or to speak at any meeting of Debentureholders
shall be the persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

Section 9.05 Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Debentureholders, in regard to proof of the
holding of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination
of proxies, certificates and other evidence of the right to vote, and such
other matters concerning the conduct of the meeting as it shall think fit.

     The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Debentureholders as provided in Section 9.03, in which case the
Company or the Debentureholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the holders of a
majority in principal amount of the Debentures represented at the meeting and
entitled to vote at the meeting.

     Subject to the provisions of Section 8.04, at any meeting each
Debentureholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Debentures held or represented by him; provided that no
vote shall be cast or counted at any meeting in respect of any Debenture
challenged as not outstanding and ruled by the chairman of the meeting to be
not outstanding. The chairman of the meeting shall have no right to vote other
than by virtue of Debentures held by him or instruments in writing as aforesaid
duly designating him as the proxy to vote on behalf of other Debentureholders.
Any meeting of Debentureholders duly called pursuant to the provisions of
Section 9.02 or Section 9.03 may be adjourned from time to time by the holders
of a majority of the aggregate principal amount of Debentures represented at
the meeting, whether or not constituting a quorum, and the meeting may be held

as so adjourned without further notice.

Section 9.06 Voting. The vote upon any resolution submitted to any
meeting of Debentureholders shall be by written ballot on which shall be
subscribed the signatures of the holders of Debentures or of their
representatives by proxy and the outstanding principal amount of the Debentures
held or represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at
the meeting. A record in duplicate of the proceedings of each meeting of
Debentureholders shall be prepared by the secretary of the meeting and there
shall be attached to said record

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the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 9.02. The
record shall show the principal amount of the Debentures voting in favor of or
against any resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee
to be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.

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

Section 9.07 No Delay of Rights by Meeting.
Nothing contained in this Article 9 shall be deemed or construed to authorize
or permit, by reason of any call of a meeting of Debentureholders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to the
Trustee or to the Debentureholders under any of the provisions of this
Indenture or of the Debentures.

Article 10

Supplemental Indentures

Section 10.01 Supplemental Indentures Without Consent of Debentureholders.
The Company and the Guarantors, when authorized by a Board Resolution or a
Member Action, as applicable, and the Trustee may, from time to time, and at
any time enter into an indenture or indentures supplemental hereto for one or
more of the following purposes:

     (a) to make provision with respect to the conversion rights of the holders
of Debentures pursuant to the requirements of Section 14.07 or the repurchase
obligations of the Company pursuant to the requirements of Section 3.08(h).

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

     (c) to evidence the assumption by a successor Person of the obligations of
the Company or the Guarantors pursuant to Article 11;

     (d) to add to the Events of Default and covenants of the Company or the
Guarantors such further Events of Default and covenants for the benefit of the
holders of Debentures, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants a default or an
Event of Default permitting the enforcement of all or any of the several
remedies provided in this Indenture as herein set forth or to surrender any
power conferred upon the Company or any Guarantor; provided that in respect of
any such additional covenant such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or longer
than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such default or may limit the remedies available to
the Trustee upon such default;

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     (e) to establish the forms or terms of the Debentures;

     (f) to cure any ambiguity or correct any error in this Indenture;

     (g) to evidence the acceptance of appointment hereunder by a successor
Trustee with respect to the Debentures;

     (h) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to qualify or maintain the qualification of
this Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted;

     (i) to increase the Conversion Rate;

     (j) to facilitate the discharge of the Debentures;

     (k) to facilitate the registration of the Debentures; or

     (l) to make other changes to the Indenture or forms or terms of the
Debentures, provided no such change individually or in the aggregate with all
other such changes has or will have a material adverse effect on the interests
of the Debentureholders.

     Upon the written request of the Company and the Guarantors accompanied by
a copy of each Board Resolution and Member Action authorizing the execution of
any supplemental indenture, the Trustee is hereby authorized to join with the
Company and the Guarantors in the execution of any such supplemental indenture,
to make any further appropriate agreements and stipulations that may be therein
contained and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any supplemental indenture that affects the Trustee’s
own rights, duties or immunities under this Indenture or otherwise.

     Any supplemental indenture authorized by the provisions of this Section
10.01 may be executed by the Company, the Guarantors, and the Trustee without
the consent of the holders of any of the Debentures at the time outstanding,
notwithstanding any of the provisions of Section 10.02.

     Notwithstanding any other provision of the Indenture or the Debentures,
the Registration Rights Agreement and the obligation to pay Additional Amounts
thereunder may be amended, modified or waived in accordance with the provisions
of the Registration Rights Agreement.

Section 10.02 Supplemental Indenture with Consent of Debentureholders.
With the consent (evidenced as provided in Article 8) of the holders of at
least a majority in aggregate principal amount of the Debentures at the time
outstanding, the Company and the Guarantors, when authorized by Board
Resolution and Member Action, and the Trustee may, from time to time and at any
time, enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or any supplemental

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indenture or of modifying in
any manner the rights of the holders of the Debentures; provided that no such
supplemental indenture shall (A) extend the Stated Maturity of any Debenture,
or (B) reduce the rate or extend the time for payment of Interest thereon, or
(C) reduce the principal amount thereof, or (D) reduce any amount payable on
redemption or repurchase thereof, or (E) impair the right of any
Debentureholder to institute suit for the payment thereof, or (F) make the
principal thereof or Interest thereon payable in any coin or currency other
than that provided in the Debentures, or (G) affect the obligation of the
Company to redeem any Debenture on a Redemption Date in a manner adverse to the
holders of Debentures, or (H) affect the obligation of the Company to
repurchase any Debenture upon the happening of a Fundamental Change in a manner
adverse to the holders of Debentures, or (I) affect the obligation of the
Company to repurchase any Debenture on a Company Repurchase Date in a manner
adverse to the holders of Debentures, or (J) subject to the terms set forth
herein, including Section 14.07, impair or adversely affect the conversion
rights of holders of the Debentures; provided, however, that the provisions of
Section 14.01(a)(iii) may be amended or modified with the consent of a majority
in aggregate principal amount of Debentures at the time outstanding if the
Board of Directors of the Company determines in good faith that such change is
necessary to preserve the accounting treatment of the Debentures in effect on
July 1, 2004; or (K) reduce the number of shares of Common Stock, the amount of
cash or the amount of other property receivable upon conversion, in each case,
without the consent of the holder of each Debenture so affected, or (L) modify
any of the provisions of this Section 10.02 or Section 6.07, except to increase
any such percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the holder of
each Debenture so affected, or (M) reduce the quorum or voting requirements set
forth in Article 9 or (N) reduce the aforesaid percentage of Debentures, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Debentures then outstanding.

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

     It shall not be necessary for the consent of the Debentureholders under
this Section 10.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

Section 10.03 Effect of Supplemental Indenture. Any supplemental
indenture executed pursuant to the provisions of this Article 10 shall comply
with the Trust Indenture Act, as then in effect, provided that this Section
10.03 shall not require such supplemental indenture or the Trustee to be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act or the

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Indenture
has been qualified under the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by any party to such supplemental indenture that
any such qualification is required prior to the time such qualification is in
fact required under the terms of the Trust Indenture Act or the Indenture has
been qualified under the Trust Indenture Act. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article 10, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company, the Guarantors
and the holders of Debentures
shall thereafter be determined, exercised and enforced hereunder, subject
in all respects to such modifications and amendments and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part
of the terms and conditions of this Indenture for any and all purposes.

Section 10.04 Notation on Debentures. Debentures authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article 10 may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Debentures so modified as to
conform, in the opinion of the Trustee and the Board of Directors of the
Company, to any modification of this Indenture contained in any such
supplemental indenture may, at the Company’s expense, be prepared and executed
by the Company, authenticated by the Trustee (or an authenticating agent duly
appointed by the Trustee pursuant to Section 17.13) and delivered in exchange
for the Debentures then outstanding, upon surrender of such Debentures then
outstanding.

     Section 10.05 Evidence of Compliance of Supplemental Indenture to Be
Furnished to Trustee. Prior to entering into any supplemental indenture, the
Trustee shall be provided with an Officers’ Certificate of the Company and an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant hereto complies with the requirements of this Article 10 and
is otherwise authorized or permitted by this Indenture.

Article 11

Consolidation, Merger, Sale, Conveyance and Lease

Section 11.01 Company or Guarantor May Consolidate on Certain Terms.
Subject to the provisions of Section 11.02, the Company shall not consolidate
with or merge with or into any other Person or Persons (whether or not
affiliated with the Company), nor shall the Company or any of its successors be
a party or parties to successive consolidations or mergers, nor shall the
Company sell, convey, transfer or lease the property and assets of the Company
substantially as an entirety, to any other Person (whether or not affiliated
with the Company), unless: (i) the Company is the surviving Person, or the
resulting, surviving or transferee Person, if other than the Company is a
corporation organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia; (ii) upon any such
consolidation, merger, sale, conveyance, transfer or lease, the due and
punctual payment of the principal of and Interest on all of the Debentures,
according to their tenor and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be performed by the
Company shall be expressly assumed, by supplemental indenture satisfactory in
form to

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the Trustee, executed and delivered to the Trustee by the Person (if
other than the Company) formed by such consolidation, or into which the Company
shall have been merged, or by the Person that shall have acquired or leased
such property, and
such supplemental indenture shall provide for the applicable conversion
rights set forth in Section 14.07; and (iii) immediately after giving effect to
the transaction described above, no Event of Default, and no event which, after
notice or passage of time or both, would become an Event of Default, shall have
happened and be continuing.

Section 11.02 Successor to Be Substituted. In case of any such
consolidation, merger, sale, conveyance, transfer or lease and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due
and punctual payment of the principal of and Interest on all of the Debentures
and the due and punctual performance of all of the covenants and conditions of
this Indenture to be performed by the Company, such successor Person shall
succeed to and be substituted for the Company, with the same effect as if it
had been named herein as the party of this first part. Such successor Person
thereupon may cause to be signed, and may issue either in its own name or in
the name of CapitalSource Inc. any or all of the Debentures, issuable hereunder
that theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor Person instead of the Company,
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver, or cause to be
authenticated and delivered, any Debentures that previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Debentures that such successor Person thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the
Debentures so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Debentures theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debentures
had been issued at the date of the execution hereof. In the event of any such
consolidation, merger, sale, conveyance, transfer or lease, the Person named as
the “Company”, in the first paragraph of this Indenture or any successor that
shall thereafter have become such in the manner prescribed in this Article 11
may be dissolved, wound up and liquidated at any time thereafter and such
Person shall be released from its liabilities as obligor and maker of the
Debentures and from its obligations under this Indenture.

     In case of any such consolidation, merger, sale, conveyance, transfer or
lease, such changes in phraseology and form (but not in substance) may be made
in the Debentures thereafter to be issued as may be appropriate.

Section 11.03 Opinion of Counsel to Be Given Trustee. The Trustee shall
receive an Officers’ Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance, transfer or
lease and any such assumption complies with the provisions of this Article 11.

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Article 12

Satisfaction and Discharge of Indenture

Section 12.01 Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for cancellation all
Debentures theretofore authenticated (other than any Debentures that have been
destroyed, lost or stolen and in lieu of or in substitution for which other
Debentures shall have been authenticated and delivered) and not theretofore
canceled, or (b) all the Debentures not theretofore canceled or delivered to
the Trustee for cancellation shall have become due and payable and the Company
shall deposit with the Trustee or with one or more Paying Agents (or, if the
Company is acting as its own Paying Agent, set aside, segregate and hold in
trust as provided in Section 4.04), in trust, funds sufficient to pay all
amounts due and owing on Debentures (other than any Debentures that shall have
been mutilated, destroyed, lost or stolen and in lieu of or in substitution for
which other Debentures shall have been authenticated and delivered) not
theretofore canceled or delivered to the Trustee for cancellation, and if in
either case the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company (including Common Stock, as applicable), then
this Indenture shall cease to be of further effect (except as to (i) remaining
rights of registration of transfer, substitution and exchange and conversion of
Debentures, (ii) rights hereunder of Debentureholders to receive payments of
principal of and Interest on the Debentures and the other rights, duties and
obligations of Debentureholders, as beneficiaries hereof with respect to the
amounts, if any, so deposited with the Trustee and (iii) the rights,
obligations and immunities of the Trustee hereunder, including those pursuant
to Section 7.06), and the Trustee, on written demand of the Company accompanied
by an Officers’ Certificate and an Opinion of Counsel as required by Section
17.06 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the
Company, however, hereby agrees to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Debentures.

Section 12.02 Paying Agent to Repay Monies Held. Upon the satisfaction
and discharge of this Indenture, all monies then held by any Paying Agent of
the Debentures (other than the Trustee) shall, upon written request of the
Company, be repaid to it or paid to the Trustee, and thereupon such Paying
Agent shall be released from all further liability with respect to such monies.

Section 12.03 Return of Unclaimed Monies. Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of or Interest on Debentures and not applied but remaining
unclaimed by the holders of Debentures for two years after the date upon which
the principal of or Interest on such Debentures, as the case may be, shall have
become due and payable, shall be repaid to the Company by the Trustee on demand
and all liability of the Trustee shall thereupon cease with respect to such
monies; and the holder of any of the Debentures shall thereafter look only to
the Company for any payment that such holder may be entitled to collect unless
an applicable abandoned property law designates another Person.

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Article 13

Immunity of Incorporators, Shareholders, Members, Officers and Directors

Section 13.01 Indenture, Debentures and Guarantees Solely Corporate or
Limited Liability Company Obligations, as the Case may be. No recourse for the
payment of the principal of or Interest on any Debenture, or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon
any obligation, covenant or agreement of the Company or any Guarantor in this
Indenture or in any supplemental indenture or in any Debenture, or because of
the creation of any indebtedness represented thereby, or for any of the
obligations of the Guarantors under the Guarantee, shall be had against any
incorporator, shareholder, member, employee, agent, officer, director or
subsidiary, as such, past, present or future, of the Company, any Guarantor, or
of any successor corporation or limited liability company, either directly or
through the Company, and Guarantor or any successor corporation or limited
liability company, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture, the issue of the Debentures, and the issue of the Guarantees.

Article 14

Conversion of Debentures

Section 14.01 Right to Convert.

     (a) Subject to and upon compliance with the provisions of this Indenture
including Section 14.03 hereof, prior to July 15, 2034, the holder of any
Debenture shall have the right, at such holder’s option, to convert the
principal amount of the Debenture, or any portion of such principal amount
which is an integral multiple of $1,000, into fully paid and non-assessable
shares of Common Stock (as such shares shall then be constituted) at the
Conversion Rate in effect at such time, by surrender of the Debenture so to be
converted in whole or in part, together with any required funds, under the
circumstances described in this Section 14.01 and in the manner provided in
Section 14.02. The Debentures shall be convertible only during the following
periods upon the occurrence of one of the following events:

          (i) during any calendar quarter commencing after the quarter ended
September 30, 2004 and before the Business Day immediately prior to the Stated
Maturity (and only during such calendar quarter) if the Last Reported Sale
Price for the Common Stock for at least twenty (20) Trading Days during the
period of thirty (30) consecutive Trading Days ending on the last Trading Day
of the previous calendar quarter is greater than or equal to 120% of the
Conversion Price on such last Trading Day;

          (ii) in the event that the Company calls any or all of the Debentures for
redemption, at any time prior to the close of business on the second Business
Day
immediately preceding the Redemption Date (unless the Company fails to pay
the

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Redemption Price); provided that only those Debentures that are called for
redemption may be converted following such an event;

          (iii) during the five (5) consecutive Business Day period after any five
(5) consecutive Trading Day period in which the Trading Price per Debenture, as
determined following a request by a holder in accordance with the procedures
described below, for each day of that period was less than 98% of the product
of the Conversion Rate and the Last Reported Sale Price of the Common Stock
such day (the “98% Trading Exception”); provided however, that if on the date
of any conversion pursuant to the 98% Trading Exception that is on or after
July 15, 2019, the Last Reported Sale Price of the Common Stock on the Trading
Day immediately prior to the Conversion Date is greater than 100% of the
Conversion Price, then Debentureholders surrendering Debentures for conversion
will receive, in lieu of shares of Common Stock based on the Conversion Rate,
shares of Common Stock with a value equal to the principal amount of Debentures
being converted (a “Principal Value Conversion”). Shares of Common Stock
delivered upon a Principal Value Conversion will be valued at the greater of
the effective Conversion Price as of the eighth day prior to the Conversion
Date and the Last Reported Sale Price as of the Conversion Date and will be
delivered no later than the third Business Day following the determination of
the Last Reported Sale Price; or

          (iv) as provided in Section (b) of this Section 14.01.

     In connection with any conversion pursuant to Section 14.01(a)(iii), the
Trustee shall have no obligation to obtain the bids necessary for the Company
to determine the Trading Price of the Debentures unless the Company has
requested it to do so, and the Company shall have no obligation to make such
request unless a holder provides the Company with reasonable evidence that the
Trading Price per Debenture is less than 98% of the product of the Last
Reported Sale Price of the Common Stock and the Conversion Rate. At such time,
the Company will instruct the Trustee to obtain the bids (in the manner
described in the definition of Trading Price) beginning on the next Trading Day
and on each successive Trading Day until the Trading Price per Debenture is
greater than or equal to 98% of the product of the Last Reported Sale Price of
the Common Stock and the Conversion Rate.

     The Company or its designated agent shall determine on a daily basis
during the time period specified in Section 14.01(a)(i)and Section
14.01(a)(iii) whether the Debentures shall be convertible as a result of the
occurrence of an event specified in clause (i) or (iii) above and, if the
Debentures shall be so convertible, the Company shall promptly deliver to the
Trustee (or other Conversion Agent appointed by the Company) written notice
thereof. Whenever the Debentures shall become convertible pursuant to this
Section 14.01, the Company or, at the Company’s request, the Trustee in the
name and at the expense of the Company, shall notify the holders of the event
triggering such convertibility in the manner provided in Section 17.03, and the
Company shall also publicly announce such information by publication on the
Company’s Web site or through such other public medium as it may use at such
time. Any notice so given shall
be conclusively presumed to have been duly given, whether or not the
holder receives such notice.

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     The Trustee shall be entitled at its sole discretion to consult with the
Company and to request the assistance of the Company in connection with the
Trustee’s duties and obligations pursuant to Section 14.01 hereof, and the
Company agrees, if requested by the Trustee, to cooperate with, and provide
assistance to, the Trustee in carrying out its duties under this Section 14.01;
provided, however, that nothing herein shall be construed to relieve the
Trustee of its duties pursuant to Section 14.01 hereof.

     (b) In addition, if:

          (i) the Company distributes to all holders of Common Stock rights or
warrants entitling them to subscribe for or purchase (for a period expiring
within 45 days of the date of the distribution) shares of Common Stock at less
than the Last Reported Sale Price of the Common Stock on the Trading Day
immediately preceding the declaration date of the distribution, or (B) the
Company distributes to all holders of Common Stock assets, debt securities or
rights to purchase securities of the Company, which distribution has a per
share value as determined by the Board of Directors of the Company and set
forth in a Board Resolution exceeding 5% of the Last Reported Sale Price of the
Common Stock on the Trading Day immediately preceding the declaration date for
such distribution, then, in either case, the Debentures may be surrendered for
conversion at any time on and after the date that the Company gives notice to
the holders of such distribution, which shall be not less than 20 Business Days
prior to the Ex-Dividend Date for such distribution, until the earlier of the
close of business on the Business Day immediately preceding, but not including,
the Ex-Dividend Date or the date the Company publicly announces that such
distribution will not take place; provided that no holder may exercise this
right to convert if the holder will otherwise participate in such distribution
without conversion;

          (ii) the Company consolidates with or merges with or into another Person
or is a party to a binding share exchange, in each case pursuant to which the
Common Stock is converted into cash or property other than securities, then the
Debentures may be surrendered for conversion at any time from and after the
date which is fifteen (15) days prior to the anticipated effective date of the
transaction until and including the date which is fifteen (15) days after the
actual effective date of the transaction. The Board of Directors of the
Company shall determine the anticipated effective date of the transaction, and
such determination shall be conclusive and binding on the holders and shall be
publicly announced by the Company by publication on its Web site or through
such other public medium as it may use at that time not later than two (2)
Business Days prior to the 15th day prior to the anticipated effective date of
the transaction. If Debentures are not surrendered pursuant to this paragraph
for conversion, at the effective time of the transaction, the right to convert
the Debentures into Common Stock will be changed into a right to convert the
Debentures into the kind and amount of, cash, securities or other property that
a Debentureholder would have received if such holder had converted such
holder’s Debentures immediately prior to the applicable Record Date for such
transaction.

     (c) A Debenture in respect of which a holder is electing to exercise its
option to require repurchase upon a Fundamental Change pursuant to Section 3.05
or repurchase

68

 

pursuant to Section 3.06 may be converted only if such holder
withdraws its election in accordance with Section 3.08(d). A holder of
Debentures is not entitled to any rights of a holder of Common Stock until such
holder has converted his Debentures to Common Stock, and only to the extent
such Debentures are deemed to have been converted to Common Stock under this
Article 14.

Section 14.02 Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends. In order to exercise
the conversion privilege with respect to any Debenture in certificated form,
the Company must receive at the office or agency of the Company maintained for
that purpose or, at the option of such holder, the Corporate Trust Office, such
Debenture with the original or facsimile of the form entitled “Form of
Conversion Notice” on the reverse thereof, duly completed and manually signed,
together with the appropriate endorsements and transfer documents, and
accompanied by the funds, if any, required by this Section 14.02. Such notice
(a “Notice of Conversion”) shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
which shall be issuable on such conversion shall be issued, and shall be
accompanied by transfer or similar taxes, if required pursuant to Section
14.08.

     In order to exercise the conversion privilege with respect to any interest
in a Global Debenture, the beneficial holder must complete, or cause to be
completed, the appropriate instruction form for conversion pursuant to the
Depositary’s book-entry conversion program, deliver, or cause to be delivered,
by book-entry delivery an interest in such Global Debenture, furnish
appropriate endorsements and transfer documents if required by the Company or
the Trustee or Conversion Agent, and pay the funds, if any, required by this
Section 14.02 and any transfer taxes if required pursuant to Section 14.08.

     As promptly as practicable after satisfaction of the requirements for
conversion set forth above, but no later than the fifth Business Day following
receipt by the Company of a Form of Conversion Notice, subject to Section 14.03
and subject also to compliance with any restrictions on transfer if shares
issuable on conversion are to be issued in a name other than that of the
Debentureholder (as if such transfer were a transfer of the Debenture or
Debentures (or portion thereof) so converted), the Company shall issue and
shall deliver, or cause the Conversion Agent to deliver, to such
Debentureholder at the office or agency maintained by the Company for such
purpose pursuant to Section 4.02, a certificate or certificates for the number
of full shares of Common Stock issuable upon the conversion of such Debenture
or portion thereof as determined by the Company in accordance with the
provisions of this Article 14 and a check or cash in respect of any fractional
interest in respect of a share of Common Stock arising upon such conversion,
calculated by the Company as provided in Section 14.03. In case any Debenture
of a denomination greater than $1,000 shall be surrendered for partial
conversion, and subject to Section 2.03, the Company shall execute and the
Trustee shall authenticate and deliver to the holder of the Debenture so
surrendered,
without charge to him, a new Debenture or Debentures in authorized
denominations in an aggregate principal amount equal to the unconverted portion
of the surrendered Debenture.

69

 

     Each conversion shall be deemed to have been effected as to any such
Debenture (or portion thereof) on the date on which the requirements set forth
above in this Section 14.02 have been satisfied as to such Debenture (or
portion thereof) (such date, the “Conversion Date”), and the Person in whose
name any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become immediately prior
to the close of business on said date the holder of record of the shares
represented thereby; provided, that any such surrender on any date when the
stock transfer books of the Company shall be closed shall constitute the Person
in whose name the certificates are to be issued as the record holder thereof
for all purposes on the next succeeding day on which such stock transfer books
are open, but such conversion shall be at the Conversion Rate in effect on the
date upon which such Debenture shall be surrendered.

     Any Debenture or portion thereof surrendered for conversion during the
period from the close of business on any Regular Record Date to the opening of
business on the immediately following Interest Payment Date shall be
accompanied by payment, in immediately available funds or other funds
acceptable to the Company, of an amount equal to the Interest (excluding
Contingent Interest and Additional Amounts, if any) otherwise payable on such
Interest Payment Date on the principal amount being converted; provided, that
no such payment need be made (1) if the Company has specified a Redemption Date
that is after a Regular Record Date and prior to the next Interest Payment
Date, (2) if the Company has specified a Repurchase Date following a
Fundamental Change that is after a Regular Record Date and on or prior to the
next Interest Payment Date or (3) to the extent of any overdue Interest, if any
overdue Interest exists at the time of conversion with respect to such
Debenture. Except as provided above in this Section 14.02, no payment or other
adjustment shall be made for Interest accrued on any Debenture converted or for
dividends on any shares issued upon the conversion of such Debenture as
provided in this Article 14.

     Upon the conversion of an interest in a Global Debenture, the Trustee (or
other Conversion Agent appointed by the Company), or the Custodian at the
direction of the Trustee (or other Conversion Agent appointed by the Company),
shall make a notation on such Global Debenture as to the reduction in the
principal amount represented thereby. The Company shall notify the Trustee in
writing of any conversions of Debentures effected through any Conversion Agent
other than the Trustee.

     Upon the conversion of a Debenture, that portion of the accrued but unpaid
Interest with respect to the converted Debenture shall not be cancelled,
extinguished or forfeited, but rather shall be deemed to be paid in full to the
holder thereof through delivery of cash or the Common Stock (together with the
cash payment, if any in lieu of fractional shares) in exchange for the
Debenture being converted pursuant to the provisions hereof; and the cash or
fair market value of such shares of Common Stock (together with any such cash
payment in lieu of fractional shares) shall be treated as
issued, to the extent thereof, first in exchange for and in satisfaction
of the Company’s obligation to pay the principal amount of the converted
Debenture and the accrued but unpaid Interest to, but not including the
Conversion Date, and the balance, if any, of such fair market value of such
cash or Common Stock (and any such cash payment) shall be

70

 

treated as issued in
exchange for and in satisfaction of the right to convert the Debenture being
converted pursuant to the provisions hereof.

Section 14.03 Payment Upon Conversion; Payment of Cash in Lieu of Common Stock.

     (a) If a Debentureholder elects to convert all or any portion of a
Debenture into shares of Common Stock as set forth in Section 14.01 and the
Company receives such Debentureholder’s Notice of Conversion on or prior to the
day that is 20 days prior to Stated Maturity, or with respect to Debentures
called for redemption pursuant to Section 3.01, the applicable Redemption Date
(the “Final Notice Date”), the Company may choose to satisfy all of its
obligation (the “Conversion Obligation”) in cash or shares. Upon such
election, the Company will notify such Debentureholder through the Trustee of
such election at any time on or before the date that is five Business Days
following the Company’s receipt of the Notice of Conversion (such period, the
"Cash Settlement Notice Period”). If the Company elects to pay cash for the
shares otherwise issuable to the Debentureholder, the Debentureholder may
retract the Notice of Conversion at any time during the two Business Day period
beginning on the day after the final day of the Cash Settlement Notice Period
(the “Conversion Retraction Period”); no such retraction can be made (and a
Notice of Conversion shall be irrevocable) if the Company does not elect to
deliver cash in lieu of shares of Common Stock (other than cash in lieu of
fractional shares). If the Notice of Conversion has not been retracted, then
the settlement (in cash or shares) will occur on the Business Day following the
final day of the seven consecutive Trading Day period beginning on the day
after the final day of the Conversion Retraction Period (the “Cash Settlement
Averaging Period”). With respect to any Notice of Conversion received by the
Company prior to the Final Notice Date, the “Conversion Settlement
Distribution” for any Debenture subject to such Notice of Conversion shall
consist of cash or Common Stock, as selected by the Company as set forth below:

          (i) if the Company elects to satisfy the Conversion Obligation in shares
of Common Stock, the Conversion Settlement Distribution shall be a number of
shares equal to (1) the aggregate principal amount of the Debentures to be
converted divided by 1,000, multiplied by (2) the Conversion Rate, plus cash
for any fractional shares pursuant to Section 14.04;

          (ii) if the Company elects to satisfy the Conversion Obligation in cash,
the Conversion Settlement Distribution shall be cash in an amount equal to the
product of:

               (A) a number equal to the product of (x) the aggregate principal amount of
Debentures to be converted divided by 1,000 multiplied by (y) the Conversion
Rate, and

               (B) the average of the Last Reported Sale Prices of the Common Stock
during the Cash Settlement Averaging Period;

     (b) At any time on or before any Final Notice Date, the Company will
notify the Trustee whether it intends to satisfy the Conversion Obligation with
respect to

71

 

conversions of Debentures for which the Company receives a Notice of
Conversion after such Final Notice Date in cash or shares. In such case, the
Company will not send individual notices of its election to satisfy the
Conversion Obligation in cash, if applicable, and the applicable Conversion
Settlement Distribution will be computed in the same manner as set forth in
clause Section 14.03 above except that the Cash Settlement Averaging Period
shall be the five consecutive Trading Days ending on the third Trading Day
prior to the Conversion Date and settlement (in cash or shares) will occur on
the third Business Day following the Conversion Date.

     (c) Notwithstanding anything to the contrary in this Indenture, at any
time prior to Stated Maturity, the Company may irrevocably elect, in its sole
discretion without the consent of the Debentureholders, by notice to the
Trustee and the Debentureholders to satisfy in cash 100% of the principal
amount of the Debentures converted after the date of such election. Settlement
amounts will be computed and settlement dates will be determined in the same
manner as set forth above under clause Section 14.03 or (b), as applicable.

Section 14.04 Fractional Shares. No fractional shares of Common Stock or
scrip certificates representing fractional shares shall be issued upon
conversion of Debentures. If more than one Debenture shall be surrendered for
conversion at one time by the same holder, the number of full shares that shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Debentures (or specified portions thereof to the extent
permitted hereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Debenture or Debentures, the Company shall
make an adjustment and payment therefor in cash to the holder of Debentures at
the Last Reported Sale Price on the last Trading Day immediately preceding the
day on which the Debentures (or specified portions thereof) are deemed to have
been converted.

Section 14.05 Conversion Rate. Each $1,000 principal amount of the
Debentures shall be convertible into the number of shares of Common Stock
specified in the form of Debenture (herein called the “Conversion Rate”)
attached as Exhibit A hereto (initially 31.4614 shares), subject to adjustment
as provided in this Article 14.

Section 14.06 Adjustment of Conversion Rate. The Conversion Rate shall be
adjusted from time to time by the Company as follows:

     (a) If the Company issues shares of Common Stock as a dividend or
distribution on shares of the Common Stock, or effects a share split or share
combination, the Conversion Rate will be adjusted based on the following
formula:

	 	 	 	 	 	 	 
	

	 	 	 	 	 	  OS’
	CR’

	 	=
	 	CR0 x
	 	———
	

	 	 	 	 	 	   OS0

     where,

	 	 	 	 	 
	CR0

	 	=
	 	the Conversion Rate in effect immediately prior to such event

72

 

	 	 	 	 	 
	 
	 	 	 	 
	CR’

	 	=
	 	the Conversion Rate in effect immediately after such event
	 
	 	 	 	 
	OS0

	 	=
	 	the number of shares of Common Stock outstanding
immediately prior to such event
	 
	 	 	 	 
	OS’

	 	=
	 	the number of shares of Common Stock outstanding
immediately after such event.

     Such adjustment shall become effective immediately after the opening of
business on the Business Day following the date fixed for such determination.
The Company will not pay any dividend or make any distribution on shares of
Common Stock held in treasury by the Company. If any dividend or distribution
of the type described in this Section 14.06(a) is declared but not so paid or
made, the Conversion Rate shall again be adjusted to the Conversion Rate that
would then be in effect if such dividend or distribution had not been declared.

     (b) If the Company issues to all or substantially all holders of its
Common Stock any rights or warrants entitling them for a period of not more
than 45 days to subscribe for or purchase shares of Common Stock, or securities
convertible into shares of Common Stock, at a price per share or a conversion
price per share less than the Last Reported Sale Price of shares of Common
Stock on the Business Day immediately preceding the time of announcement of
such issuance, the Conversion Rate will be adjusted based on the following
formula (provided that the Conversion Rate will be readjusted to the extent
that such rights or warrants are not exercised prior to their expiration):

	 	 	 	 	 	 	 
	

	 	 	 	 	 	OS0 + X
	CR’

	 	= CR0
	 	x
	 	———
	

	 	 	 	 	 	OS0 + Y

	 	 	 	 	 
	where,
	 	 	 	 
	 
	 	 	 	 
	CR0

	 	=
	 	the Conversion Rate in effect immediately prior to such event
	 
	 	 	 	 
	CR’

	 	=
	 	the Conversion Rate in effect immediately after such event
	 
	 	 	 	 
	OS0

	 	=
	 	the number of shares of Common Stock outstanding
immediately prior to such event
	 
	 	 	 	 
	X

	 	=
	 	the total number of shares of Common Stock issuable
pursuant to such rights
	 
	 	 	 	 
	Y

	 	=
	 	the number of shares of Common Stock equal to the aggregate
price payable to exercise such rights divided by the average of the
Last Reported Sale Prices of Common Stock for the ten consecutive
Trading Days prior to the Business Day immediately preceding the
Ex-Dividend Date with respect to the issuance of such rights.

     Such adjustment shall be successively made whenever any such rights or
warrants are issued and shall become effective immediately after the opening of
business on the

73

 

Business Day following the date fixed for such determination.
The Company shall not issue any such rights, options or warrants in respect of
shares of Common Stock held in treasury by the Company. To the extent that
shares of Common Stock are not delivered after the expiration of such rights or
warrants, the Conversion Rate shall be readjusted to the Conversion Rate that
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. If such rights or warrants are not
so issued, the Conversion Rate shall again be adjusted to be the Conversion
Rate that would then be in effect if such date fixed for the determination of
shareholders entitled to receive such rights or warrants had not been fixed.

     In determining whether any rights or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than the Last Reported
Sale Price of shares of Common Stock on the Business Day immediately preceding
the time of announcement of such issuance, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received by the Company for such rights or warrants
and any amount payable on exercise or conversion thereof, the value of such
consideration, if other than cash, to be determined by the Board of Directors
of the Company.

     (c) If the Company distributes shares of its Capital Stock, evidences of
its indebtedness or other assets or property of the Company to all or
substantially all holders of the Common Stock, excluding:

          (i) dividends, distributions and rights or warrants referred to in clause
(a) or (b) above; and

          (ii) dividends or distributions paid exclusively in cash referred to in
clause (d) below;

     then the Conversion Rate will be adjusted based on the following formula:

	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	       SP0
	CR’

	 	=
	 	CR0
	 	x
	 	—————
	

	 	 	 	 	 	 	 	SP0 – FMV

	 	 	 	 	 
	where,
	 	 	 	 
	 
	 	 	 	 
	CR0

	 	=
	 	the Conversion Rate in effect immediately prior to such distribution
	 
	 	 	 	 
	CR’

	 	=
	 	the Conversion Rate in effect immediately after such distribution
	 
	 	 	 	 
	SP0

	 	=
	 	the average of the Last Reported Sale Prices of the Common
Stock for the ten days prior to the Business Day immediately
preceding the Ex-Dividend Date with respect to such distribution
	 
	 	 	 	 
	FMV

	 	=
	 	the fair market value (as determined by the Board of
Directors of the Company) of the shares of Capital Stock, evidences
of indebtedness,

74

 

	 	 	 	 	 
	

	 	 	 	assets or property distributed with respect to each
outstanding share of Common Stock on the Record Date for such
distribution.

     Such adjustment shall become effective immediately prior to the opening of
business on the Business Day following the date fixed for the determination of
shareholders entitled to receive such distribution.

     (d) If the Company makes any cash dividend or distribution during any
quarterly fiscal period to all or substantially all holders of Common Stock,
the Conversion Rate will be adjusted based on the following formula:

	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	   SP0
	CR’

	 	=
	 	CR0
	 	x
	 	————
	

	 	 	 	 	 	 	 	SP0 – C

     where,

	 	 	 	 	 
	CR0

	 	=
	 	the Conversion Rate in effect immediately prior to the
Record Date for such distribution
	 
	 	 	 	 
	CR’

	 	=
	 	the Conversion Rate in effect
immediately after the Record
Date for such distribution
	 
	 	 	 	 
	SP0

	 	=
	 	the average of the Last Reported Sale Prices of our Common
Stock for the ten consecutive Trading Days prior to the Business Day
immediately preceding the Ex-Dividend Date with respect to such
distribution
	 
	 	 	 	 
	C

	 	=
	 	the amount in cash per share the Company distributes to
holders of Common Stock.

     Such adjustment shall become effective immediately prior to the opening of
business on the Business Day following the date fixed for the determination of
shareholders entitled to receive such distribution.

     (e) If the Company or any of its Subsidiaries makes a payment in respect
of a tender offer or exchange offer for the Common Stock, to the extent that
the cash and value of any other consideration included in the payment per share
of Common Stock exceeds the Last Reported Sale Price of the Common Stock on the
Trading Day next succeeding the last date on which tenders or exchanges may be
made pursuant to such
tender or exchange offer (the “Expiration Time”), the Conversion Rate will
be increased based on the following formula:

	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	AC + (SP’x OS’)
	CR’

	 	=
	 	CR0
	 	x
	 	———————
	

	 	 	 	 	 	 	 	     OS0 x SP’

     where,

75

 

	 	 	 	 	 
	CR0

	 	=
	 	the Conversion Rate in effect on
the date such tender or
exchange offer expires
	 
	 	 	 	 
	CR’

	 	=
	 	the Conversion Rate in effect on the day next succeeding
the date such tender or exchange offer expires
	 
	 	 	 	 
	AC

	 	=
	 	the aggregate value of all cash and any other consideration
(as determined by the Board of Directors of the Company) paid or
payable for shares purchased in such tender or exchange offer
	 
	 	 	 	 
	OS0

	 	=
	 	the number of shares of Common Stock outstanding
immediately prior to the date such tender or exchange offer expires
	 
	 	 	 	 
	OS’

	 	=
	 	the number of shares of Common Stock outstanding
immediately after the date such tender or exchange offer expires
	 
	 	 	 	 
	SP’

	 	=
	 	the average of the Last Reported Sale Prices of Common
Stock for the ten consecutive Trading Days commencing on the Trading
Day next succeeding the date such tender or exchange offer expires.

     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 Rate shall again be adjusted to be the Conversion Rate that would
then be in effect if such tender or exchange offer had not been made.

     If, however, the application of the foregoing formula would result in a
decrease in the Conversion Rate, no adjustment to the Conversion Rate will be
made.

     Except as stated herein, the Company will not adjust the Conversion Rate
for the issuance of shares of Common Stock or any securities convertible into
or exchangeable for shares of Common Stock or the right to purchase shares of
Common Stock or such convertible or exchangeable securities.

     (f) [Reserved]

     (g) Notwithstanding the foregoing provisions of this Section 14.06, no
adjustment shall be made thereunder, nor shall an adjustment be made to the
ability of a Holder of a Debenture to convert, for any distribution described
therein if the Holder will otherwise participate in the distribution without
conversion of such Holder’s Debentures.

     (h) The Company may (but is not required to) make such increases in the
Conversion Rate, in addition to those required by clauses (a) through (e) of
this Section 14.06 as the Board of Directors of the Company considers to be
advisable to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common Stock in connection with a dividend or distribution
of shares (or rights to acquire shares) or any similar event treated as such
for income tax purposes.

76

 

     To the extent permitted by applicable law, the Company from time to time
may increase the Conversion Rate by any amount for any period of at least
twenty (20) days if the Board of Directors of the Company shall have made a
determination that such increase would be in the best interests of the Company,
which determination shall be conclusive. Whenever the Conversion Rate is
increased pursuant to the preceding sentence, the Company shall mail to holders
of record of the Debentures a notice of the increase at least fifteen (15) days
prior to the date the increased Conversion Rate takes effect, and such notice
shall state the increased Conversion Rate and the period during which it will
be in effect.

     (i) No adjustment to the Conversion Rate need be made:

          (i) upon the issuance of any shares of Common Stock pursuant to any
present or future plan providing for the reinvestment of dividends or interest
payable on securities of the Company and the investment of additional optional
amounts in shares of Common Stock under any plan;

          (ii) upon the issuance of any shares of Common Stock or options or rights
to purchase those shares pursuant to any present or future employee, director
or consultant benefit plan or program of or assumed by the Company or any of
its Subsidiaries;

          (iii) upon the issuance of any shares of Common Stock pursuant to any
option, warrant, right, or exercisable, exchangeable or convertible security
not described in subclause (ii) above and outstanding as of the date the
Debentures were first issued;

          (iv) if the Debentureholders may participate in the transaction that would
otherwise give rise to an adjustment pursuant to this Section 14.06;

          (v) for a change in the par value of the Common Stock; or

          (vi) for accrued and unpaid Interest.

     (j) No adjustment to the Conversion Rate shall be required pursuant to
this Section 14.06 until the earlier of (1) such time as the Company shall have
mailed or caused to be mailed a Redemption Notice to be made pursuant to
Section 3.02, or (2) such adjustment would require an increase or decrease of
at least 1.0% in the Conversion Rate; provided, however, that any adjustments
which by reason of this clause (j) of Section 14.06 are not required to be
made, shall be carried forward and taken into account in any subsequent
adjustment.

     (k) All calculations under this Article 14 shall be made by the Company
and shall be made to the nearest cent or to the nearest one-ten thousandth
(1/10,000) of a share, as the case may be.

     (l) Whenever the Conversion Rate is adjusted as herein provided, the
Company shall promptly file with the Trustee and any Conversion Agent other
than the Trustee an Officers’ Certificate setting forth the Conversion Rate
after such adjustment

77

 

and setting forth a brief statement of the facts
requiring such adjustment. Unless and until a Responsible Officer of the
Trustee shall have received such Officers’ Certificate, the Trustee shall not
be deemed to have knowledge of any adjustment of the Conversion Rate and may
assume that the last Conversion Rate of which it has knowledge is still in
effect. Promptly after delivery of such certificate, the Company shall prepare
a notice of such adjustment of the Conversion Rate setting forth the adjusted
Conversion Rate and the date on which each adjustment becomes effective and
shall mail such notice of such adjustment of the Conversion Rate to the holder
of each Debenture at his last address appearing on the Debenture Register
provided for in Section 2.05 of this Indenture, within twenty (20) days after
execution of such Officers’ Certificate. Failure to deliver such notice shall
not affect the legality or validity of any such adjustment.

     (m) In any case in which this Section 14.06 provides that an adjustment
shall become effective immediately after (1) a Record Date for an event, (2)
the date fixed for the determination of shareholders entitled to receive a
dividend or distribution pursuant to Section 14.06(a), (c), or (d), (3) a date
fixed for the determination of shareholders entitled to receive rights or
warrants pursuant to Section 14.06(b), or (4) the Expiration Time for any
tender or exchange offer pursuant to Section 14.06(e), (each a “Determination
Date”), the Company may elect to defer until the occurrence of the applicable
Adjustment Event (as hereinafter defined) (x) issuing to the holder of any
Debenture converted after such Determination Date and before the occurrence of
such Adjustment Event, the additional shares of Common Stock or other
securities issuable upon such conversion by reason of the adjustment required
by such Adjustment Event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (y) paying to such
holder any amount in cash in lieu of any fraction pursuant to Section 14.03.
For purposes of this Section 14.06(m), the term “Adjustment Event” shall mean:

          (i) in any case referred to in clause (1) hereof, the occurrence of such
event,

          (ii) in any case referred to in clause (2) hereof, the date any such
dividend or distribution is paid or made,

          (iii) in any case referred to in clause (3) hereof, the date of expiration
of such rights or warrants, and

          (iv) in any case referred to in clause (4) hereof, the date a sale or
exchange of Common Stock pursuant to such tender or exchange offer is
consummated and becomes irrevocable.

     (n) For purposes of this Section 14.06, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not
pay any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.

78

 

Section 14.07 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 14.06(a) applies), (ii) any consolidation, merger,
binding share exchange or combination of the Company with another Person as a
result of which holders of Common Stock shall be entitled to receive cash,
securities or other property with respect to or in exchange for such Common
Stock, or (iii) any sale or conveyance of all or substantially all of the
properties and assets of the Company to any other Person, in each case as a
result of which holders of Common Stock shall be entitled to receive cash,
securities or other property with respect to or in exchange for such Common
Stock, then the Company or the successor or purchasing Person, as the case may
be, shall execute with the Trustee a supplemental indenture (which shall comply
with the Trust Indenture Act as in force at the date of execution of such
supplemental indenture) providing that each Debenture shall be convertible into
the kind and amount of cash, securities or other property receivable upon such
reclassification, change, consolidation, merger, binding share exchange,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Debentures immediately prior to such
reclassification, change, consolidation, merger, binding share exchange,
combination, sale or conveyance, assuming such holder of Common Stock did not
exercise his rights of election, if any, as to the kind or amount of cash,
securities or other property receivable upon such reclassification, change,
consolidation, merger, binding share exchange, combination, sale or conveyance
(provided that, if the kind or amount of cash, securities or other property
receivable upon such reclassification, change, consolidation, merger, binding
share exchange, combination, sale or conveyance is not the same for each share
of Common Stock in respect of which such rights of election shall not have been
exercised (“non-electing share”), then for the purposes of this Section 14.07
the kind and amount of cash, securities or other property receivable upon such
reclassification, change, consolidation, merger, binding share exchange,
combination, sale or conveyance for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 14.

     The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Debentures, at its address appearing
on the Debenture Register provided for in Section 2.05 of this Indenture,
within twenty (20) days after execution thereof. Failure to deliver such
notice shall not affect the legality or validity of such supplemental
indenture.

     The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, binding share exchanges,
combinations, sales and conveyances.

     If this Section 14.07 applies to any event or occurrence, Section 14.06
shall not apply.

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Section 14.08 Taxes on Shares Issued. The issuance of stock certificates
on conversions of Debentures shall be made without charge to the converting
Debentureholder for any documentary, stamp or similar issue or transfer tax in
respect of the issue thereof. The Company shall not, however, be required to
pay any such tax which may be payable in respect of any transfer involved in
the issue and delivery of stock in any name other than that of the holder of
any Debenture converted, and the Company shall not be required to issue or
deliver any such stock certificate unless and until the Person or Persons
requesting the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid.

Section 14.09 Reservation of Shares, Shares to Be Fully Paid; Compliance with
Governmental Requirements; Listing of Common Stock. The Company shall provide,
free from preemptive rights, out of its authorized but unissued shares or
shares held in treasury, sufficient shares of Common Stock to provide for the
conversion of the Debentures from time to time as such Debentures are presented
for conversion.

     Before taking any action which would cause an adjustment increasing the
Conversion Rate to an amount that would cause the Conversion Price to be
reduced below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Debentures, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Rate.

     The Company covenants that all shares of Common Stock which may be issued
upon conversion of Debentures will upon issue be fully paid and non-assessable
by the Company and free from all taxes, liens and charges with respect to the
issue thereof.

     The Company covenants that, if any shares of Common Stock to be provided
for the purpose of conversion of Debentures hereunder require registration with
or approval of any governmental authority under any federal or state law before
such shares may be validly and lawfully issued upon conversion, the Company
will in good faith and as expeditiously as possible, to the extent then
permitted by the rules and interpretations of the Commission (or any successor
thereto), endeavor to secure such registration or approval, as the case may be.

     The Company further covenants that, if at any time the Common Stock shall
be listed on the New York Stock Exchange, National Association of Securities
Dealers
Automated Quotation System or any other national securities exchange or
automated quotation system, the Company will, if permitted by the rules of such
exchange or automated quotation system, list and keep listed, so long as the
Common Stock shall be so listed on such exchange or automated quotation system,
all Common Stock issuable upon conversion of the Debentures.

Section 14.10 Responsibility of Trustee. The Trustee and any other Conversion
Agent shall not at any time be under any duty or responsibility to the Company
or any holder of Debentures to determine the Conversion Rate or whether any
facts exist which may require any adjustment of the Conversion Rate, or with
respect to the nature or extent or

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calculation of any such adjustment when
made, or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. The Trustee and any
other Conversion Agent shall not be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any
securities or property, which may at any time be issued or delivered upon the
conversion of any Debenture; and the Trustee and any other Conversion Agent
make no representations with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to issue,
transfer or deliver any shares of Common Stock or stock certificates or other
securities or property or cash upon the surrender of any Debenture for the
purpose of conversion or to comply with any of the duties, responsibilities or
covenants of the Company contained in this Article 14. Without limiting the
generality of the foregoing, neither the Trustee nor any Conversion Agent shall
be under any responsibility to determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to Section 14.07
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by Debentureholders upon the conversion of
their Debentures after any event referred to in such Section 14.07 or to any
adjustment to be made with respect thereto, but, subject to the provisions of
Section 7.01, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officers’ Certificate
(which the Company shall be obligated to file with the Trustee prior to the
execution of any such supplemental indenture) with respect thereto.

Section 14.11 Notice to Holders Prior to Certain Actions. In case:

     (a) the Company shall declare a dividend (or any other distribution) on
its Common Stock that would require an adjustment in the Conversion Rate
pursuant to Section 14.06; or

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

     (c) of any reclassification or reorganization of the Common Stock of the
Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or

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

     the Company shall cause to be filed with the Trustee and to be mailed to
each holder of Debentures at his address appearing on the Debenture Register
provided for in Section 2.05 of this Indenture, as promptly as possible but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or

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warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is expected to
become effective or occur, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.

Section 14.12 Shareholders. If the Company adopts or subsequently amends
a shareholder rights plan and if the rights provided for in such plan have
separated from the shares of Common Stock in accordance with the provisions of
the applicable shareholder rights agreement so that the holders of the
Debentures would not be entitled to receive any rights in respect of Common
Stock issuable upon conversion of the Debentures, the conversion rate will be
adjusted as if the Company distributed to all holders of Common Stock shares of
the Company’s Capital Stock, evidences of indebtedness or assets (including
securities but excluding rights or warrants to purchase Common Stock issued to
all holders of Common Stock, Common Stock issued as a dividend or distribution
on Common Stock and cash distributions), subject to readjustment upon the
subsequent expiration, termination or redemption of the rights. In lieu of any
such adjustment, the Company may amend any such future shareholder rights
agreement to provide that upon conversion of the debentures the holders will
receive, in addition to the Common Stock issuable upon such conversion, the
rights which would have attached to such Common Stock if the rights had not
become separated from the Common Stock under such applicable shareholder rights
agreement.

Article 15

Guarantees

Section 15.01 Guarantees. Except as otherwise provided herein, each
Guarantor hereby fully and unconditionally guarantees to each holder of a
Debenture authenticated and delivered by the Trustee, and to the Trustee on
behalf of such Debentureholder, the due and punctual payment of the principal
of and Interest on such Debenture and all other obligations of the Company
under this Indenture when and as the same shall become due and payable, whether
at the Stated Maturity, by acceleration, call for redemption, upon a Repurchase
Date or otherwise, in accordance with the terms of such Debenture and of this
Indenture (collectively, the “Indenture Obligations”). The Guarantors hereby
fully and unconditionally also guarantee to the Trustee the due and punctual
payment of all obligations of the Company to the Trustee under this Indenture.
In case of the failure of the Company punctually to make any such payment, the
Guarantors hereby jointly and severally agree to cause such payment to be made
punctually when and as the same shall become due and payable, whether at the
Stated Maturity, by acceleration, call for redemption, upon a Repurchase Date
or otherwise, and as if such payment were made by the Company.

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     Each Guarantor jointly and severally agrees that its obligations hereunder
shall be absolute and unconditional, irrespective of, and shall be unaffected
by, the validity, regularity or enforceability of such Debenture or this
Indenture, the absence of any action to enforce the same or any release,
amendment, waiver or indulgence granted to the Company or any Guarantor or any
consent to depart from any requirement of any other guarantee of all or any of
the Debentures or any other circumstances which might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor. The
Guarantors hereby waive to the fullest extent permitted by law the benefits of
diligence, presentment, demand for payment, any requirement that the Trustee or
any of the Debentureholders protect, secure, perfect or insure any security
interest in or other lien on any property subject thereto or exhaust any right
or take any action against the Company or any other Person or any collateral,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest
or notice with respect to such Debenture or the indebtedness evidenced thereby
and all demands whatsoever, and covenants that the Guarantees will not be
discharged in respect of such Debenture except by complete performance of the
payment obligations contained in such Debenture and in such Guarantee. The
Guarantors jointly and severally agree that if, after the occurrence and during
the continuance of an Event of Default, the Trustee or any of the
Debentureholders are prevented by applicable law from exercising their
respective rights to accelerate the maturity of the Debentures, to collect
Interest on the Debentures, or to enforce or exercise any other right or remedy
with respect to the Debentures, the Guarantors jointly and severally agree to
the fullest extent permitted by law to pay to the Trustee for the account of
the Debentureholders, upon demand therefor, the amount that would otherwise
have been due and payable had such rights and remedies been permitted to be
exercised by the Trustee or any of the Debentureholders.

     Each Guarantor shall be subrogated to all rights of the holders of the
Debentures upon which its Guarantee is endorsed against the Company in respect
of any amounts paid by such Guarantor on account of such Debenture pursuant to
the provisions of its Guarantee or this Indenture; provided, however, that the
Guarantors shall not be entitled to enforce or to receive any payment arising
out of, or based upon, such right of subrogation until the principal of and
Interest, if any, on all Debentures issued hereunder shall have been paid in
full.

     Each Guarantee shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Company for
liquidation or reorganization, should the Company become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any part of the Company’s assets, and shall, to the
fullest extent permitted by law, continue to be effective or be reinstated, as
the case may be, if at any time payment and performance of the Debentures is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise
be restored or returned by any Debentureholder, whether as a “voidable
preference,” “fraudulent transfer,” or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Debentures shall, to
the fullest extent permitted by law, be reinstated and

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deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

     Any term or provision of any Guarantee to the contrary notwithstanding,
the aggregate amount of the obligations guaranteed hereunder shall be reduced
to the extent necessary to prevent such Guarantee from violating or becoming
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors generally.

Section 15.02 Execution and Delivery of Guarantees. The Guarantees to be
endorsed on the Debentures shall include the terms and shall be substantially
in the form of the Guarantee set forth in Exhibit A. Each Guarantor hereby
agrees to execute its Guarantee, in substantially the form set forth in Exhibit
A, to be endorsed on each Debenture authenticated and delivered by the Trustee.

     The Guarantees shall be executed on behalf of each Guarantor by any one of
such Guarantor’s Chief Executive Officer, Chief Operating Officer, President,
Chief Financial Officer, Chief Credit Officer, Chief Legal Officer, Managing
Director, Chief Accounting Officer, any Vice President (whether or not
designated by a number or numbers or word or words added before or after the
title “Vice President”), Secretary or Controller or other person duly
authorized by Member Action on behalf of such Guarantor. The signature of any
or all of these persons on the Guarantee may be manual or facsimile.

     A Guarantee bearing the manual or facsimile signature of individuals who
were at any time the proper officers of any Guarantor shall bind such
Guarantor, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the
authentication and delivery of the Debenture on which such Guarantee is
endorsed or did not hold such offices at the date of such Guarantee.

     The delivery of any Debenture by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee endorsed
thereon on behalf of each Guarantor.

Section 15.03 Release of Guarantees. Notwithstanding anything in this
Article 15 to the contrary, concurrently with the payment in full of (i) the
principal of and Interest on the Debentures and (ii) all other obligations of
the Company under this Indenture, the Guarantors shall be released from and
relieved of their obligations under this Article 15. Upon the delivery by the
Company to the Trustee of an Officers’ Certificate and an Opinion of Counsel to
the effect that the transaction giving rise to the release of a Guarantee was
made by the Company in accordance with the provisions of this Indenture and the
Debentures, the Trustee shall execute any documents reasonably required in
order to evidence the release of the Guarantors from their obligations under
such Guarantee. If any of the obligations to pay the principal of and Interest
on the Debentures and all other obligations of the Company are revived and
reinstated after the termination of such Guarantee, then all of the obligations
of the Guarantors under such Guarantee shall be revived and reinstated as if
such Guarantee had not been terminated until such time as the principal of and
Interest on the Debentures are paid in full, and each Guarantor shall enter

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into an amendment to such Guarantee, reasonably satisfactory to the Trustee,
evidencing such revival and reinstatement.

Article 16

Contingent Interest

Section 16.01 Contingent Interest . Additional interest (“Contingent
Interest”) will accrue on each Debenture during an Interest Period, beginning
with the Interest Period commencing on July 15, 2011, if the average Trading
Price of the Debentures during the five consecutive Trading Days immediately
preceding such Interest Period equals or exceeds 130% of the principal amount
of the Debentures. If Contingent Interest accrues during an Interest Period
pursuant to the preceding sentence, the amount of Contingent Interest payable
with respect to such Interest Period per $1,000 principal amount of Debentures
shall equal 0.375% of the average Trading Price during the applicable five
Trading Day period immediately preceding such Interest Period.

     The Trustee’s sole responsibility pursuant to this Section 16.01 shall be
to obtain the bids for determining the Trading Price of the Debentures for each
Trading Day during the applicable five Trading Day period and to provide such
information to the Company, to the extent that the Trustee is then the Bid
Solicitation Agent. The Company shall determine the Trading Price and whether
holders are entitled to receive Contingent Interest, and if so, provide notice
pursuant to Section 16.03. Notwithstanding any term
contained in this Indenture or any other document to the contrary, the
Trustee shall have no responsibilities, duties or obligations for or with
respect to (i) determining whether the Company must pay Contingent Interest or
(ii) determining the amount of Contingent Interest, if any, payable by the
Company.

Section 16.02 Payment of Contingent Interest. Contingent Interest for any
Interest Period shall be paid on the immediately succeeding Interest Payment
Date to the Person in whose name any Debenture (or its Predecessor Debenture)
is registered on the Debenture Register at the close of business on the
corresponding Regular Record Date. Contingent Interest due under this Article
16 shall be treated for all purposes of this Indenture like any other interest
accruing on the Debentures.

Section 16.03 Contingent Interest Notification. As soon as practicable
following the first Business Day of an Interest Period for which Contingent
Interest will be payable pursuant to Section 16.01, the Company shall deliver
notice to the Trustee and, for so long as the Debentures are evidenced by a
Global Debenture, the Depositary, and thereafter to each holder at the address
shown on the Debenture Register, stating that Contingent Interest will be paid
on the Debentures. Such notice shall state the amount of such Contingent
Interest and set forth the manner in which such amount was calculated. The
Company shall publish such information on its website on the World Wide Web.

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Article 17

Miscellaneous Provisions

Section 17.01 Provisions Binding On Company’s and Guarantors’ Successors.
All the covenants, stipulations, promises and agreements by the Company or any
Guarantor contained in this Indenture shall bind the Company’s and the
Guarantors’, as the case may be, successors and assigns whether so expressed or
not.

Section 17.02 Official Acts By Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company or any Guarantor
shall and may be done and performed with like force and effect by the like
board, committee or officer of any Person that shall at the time be the lawful
sole successor of the Company or any Guarantor.

     Section 17.03 Addresses For Notices, Etc. Any request, notice or demand
which by any provision of this Indenture is required or permitted to be given
or served by the Trustee or by the holders of Debentures on the Company or any
Guarantor shall be deemed to have been sufficiently given or made, for all
purposes, if delivered by messenger or overnight carrier, given or served by
being deposited postage prepaid by registered or certified mail in a post
office letter box or sent by telecopier transmission addressed as follows: to
CapitalSource Inc., 4445
Willard Avenue, 12th Floor, Chevy Chase, Maryland 20815, Telecopier No.:
301-841-2375, Attention: Chief Financial Officer. Any notice, direction,
request or demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if delivered by messenger or
overnight carrier, given or served by being deposited, postage prepaid, by
registered or certified mail in a post office letter box or sent by telecopier
transmission addressed as follows: 60 Livingston Avenue, St. Paul, MN,
55107-2292, Attn: Corporate Trust Department, Telecopier No.: 651-495-8097;
provided, however, that the Trustee shall not be deemed to have received notice
until such notice is actually received.

     The Company, any Guarantor, or the Trustee, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.

     Any notice or communication mailed to a Debentureholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Debenture Register and shall be sufficiently given to him if so mailed within
the time prescribed.

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

Section 17.04 Notice to Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Debentureholders shall be
filed with the Trustee, but such

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filing shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.

Section 17.05 Governing Law. This Indenture and each Debenture 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 (including Section 5-1401 of the New York General Obligations Law or any
successor to such statute).

Section 17.06 Evidence of Compliance with Conditions Precedent,
Certificates to Trustee. Upon any application, request or demand by the
Company or any Guarantor to the Trustee to take any action under any of the
provisions of this Indenture, the Company or the Guarantor, as applicable,
shall furnish to the Trustee an Officers’ Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating
that, in the opinion of such counsel, all such conditions precedent have been
complied with.

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

Section 17.07 Legal Holidays. In any case in which the date of maturity
of Interest on or principal of the Debentures or the Redemption Date of any
Debenture or any Repurchase Date with respect to any Debenture will not be a
Business Day, then payment of such Interest on or principal of the Debentures
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the date of maturity or the
Redemption Date or the Repurchase Date, as the case may be, and no interest
shall accrue for the period from and after such date.

Section 17.08 Company Responsible for Making Calculations. The Company
will be responsible for making all calculations called for under this
Indenture. These calculations include, but are not limited to, determination
of the Last Reported Sale Price or Trading Price, the amount of accrued
Interest payable on the Debentures, whether Contingent Interest is payable on
the Debentures and, if so, in what amount, and the Conversion Rate of the
Debentures. The Company will make these calculations in good faith and, absent
manifest error, these calculations will be final and binding on the
Debentureholders. Promptly after the calculation thereof, the Company will
provide to each of the Trustee and the Conversion Agent an Officers’
Certificate setting forth a schedule of its calculations, and each of the
Trustee and the Conversion Agent is entitled to conclusively rely upon the
accuracy of such calculations without independent

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verification. The Trustee
will forward the Company’s calculations to any Holder upon the written request
of such Holder.

Section 17.09 Trust Indenture Act. This Indenture is hereby made subject
to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided that unless otherwise required by law, notwithstanding
the foregoing, this Indenture and the Debentures issued hereunder shall not be
subject to the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section
314 of the Trust Indenture Act as now in effect or as hereafter amended or
modified; provided further that this Section 17.09 shall not require this
Indenture or the Trustee to be qualified under the Trust Indenture Act prior to
the time such qualification is in fact required under the terms of the Trust
Indenture Act, nor shall it constitute any admission or acknowledgment by
any party to the Indenture that any such qualification is required prior
to the time such qualification is in fact required under the terms of the Trust
Indenture Act. If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in an indenture
qualified under the Trust Indenture Act, such required provision shall control.

Section 17.10 No Security Interest Created. Except as provided in Section
7.06, nothing in this Indenture or in the Debentures, expressed or implied,
shall be construed to constitute a security interest under the Uniform
Commercial Code or similar legislation, as now or hereafter enacted and in
effect, in any jurisdiction in which property of the Company or its
subsidiaries is located.

Section 17.11 Benefits of Indenture. Nothing in this Indenture or in the
Debentures, express or implied, shall give to any Person, other than the
parties hereto, any Paying Agent, any authenticating agent, any Debenture
Registrar and their successors hereunder and the holders of Debentures, any
benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 17.12 Table of Contents, Headings, Etc. The table of contents and
the titles and headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a
part hereof, and shall in no way modify or restrict any of the terms or
provisions hereof.

Section 17.13 Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Debentures in
connection with the original issuance thereof and transfers and exchanges of
Debentures hereunder, including under Section 2.04, Section 2.05, Section 2.06,
Section 2.07, Section 3.02 and Section 3.08, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Debentures. For
all purposes of this Indenture, the authentication and delivery of Debentures
by the authenticating agent shall be deemed to be authentication and delivery
of such Debentures “by the Trustee” and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Debentures for the Trustee’s
certificate of authentication. Such authenticating

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agent shall at all times be
a Person eligible to serve as trustee hereunder pursuant to Section 7.09.

     Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is
otherwise eligible under this Section 17.13, without the execution or
filing of any paper or any further act on the part of the parties hereto or the
authenticating agent or such successor corporation.

     Any authenticating agent may at any time resign by giving written notice
of resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall either promptly appoint a successor authenticating agent or
itself assume the duties and obligations of the former authenticating agent
under this Indenture and, upon such appointment of a successor authenticating
agent, if made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment
of a successor authenticating agent to all holders of Debentures as the names
and addresses of such holders appear on the Debenture Register.

     The Company agrees to pay to the authenticating agent from time to time
such reasonable compensation for its services as shall be agreed upon in
writing between the Company and the authenticating agent.

     The provisions of Section 7.02, Section 7.03, Section 7.04 and Section
8.03 and this Section 17.02 shall be applicable to any authenticating agent.

Section 17.14 Execution in Counterparts. This Indenture may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

Section 17.15 Severability. In case any provision in this Indenture or in
the Debentures shall be invalid, illegal or unenforceable, then (to the extent
permitted by law) the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

     U.S. Bank National Association hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions herein above set forth.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed.

	 	 	 	 	 	 	 	 	 
	 	 	CAPITALSOURCE INC., as Issuer
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Steven A. Museles
	 	 	 	 	
 
	

	 	 	 	Name:
	 	Steven A. Museles

	

	 	 	 	Title:
	 	Senior Vice President

	 
	 	 	 	 	 	 	 	 
	 	 	CAPITALSOURCE HOLDINGS LLC,

as Guarantor
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Steven A. Museles
	 	 	 	 	
 
	

	 	 	 	Name:
	 	Steven A. Museles

	

	 	 	 	Title:
	 	Senior Vice President

	 
	 	 	 	 	 	 	 	 
	 	 	CAPITALSOURCE FINANCE LLC,

as Guarantor
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Steven A. Museles
	 	 	 	 	
 
	

	 	 	 	Name:
	 	Steven A. Museles

	

	 	 	 	Title:
	 	Senior Vice President

	 
	 	 	 	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION, as Trustee
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Frank P. Leslie, III
	 	 	 	 	
 
	

	 	 	 	Name:
	 	Frank P. Leslie, III

	

	 	 	 	Title:
	 	Vice President

90

 

EXHIBIT A

[Include only for Global Debentures:]

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY”, WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE
CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.

[Include only for Debentures that are 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 AND THE COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

     THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF CAPITALSOURCE INC.
THAT (A) PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF
THE SECURITY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (I) TO CAPITALSOURCE INC. OR ANY SUBSIDIARY THEREOF (II) 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, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE

A-1

 

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 OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THIS LEGEND WILL
BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS SECURITY PURSUANT TO CLAUSE
(A)(IV) ABOVE OR UPON ANY TRANSFER OF THIS SECURITY UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
SECURITY IN VIOLATION OF THE FOREGOING RESTRICTION. IN ADDITION, THE HOLDER
HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS
WITH REGARD TO THIS SECURITY OR THE COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION).

     THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION
RIGHTS AGREEMENT DATED JULY 7, 2004 AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE
BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS
AGREEMENT.

     THE NOTES ARE BEING ISSUED WITH “ORIGINAL ISSUE DISCOUNT” FOR PURPOSES OF
SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. IN
ADDITION, THE ISSUER AGREES, AND BY ACCEPTING A BENEFICIAL OWNERSHIP INTEREST
IN THIS DEBENTURE EACH HOLDER AND ANY BENEFICIAL OWNER OF THIS DEBENTURE WILL
BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES (1) TO
TREAT THIS DEBENTURE AS A DEBT INSTRUMENT THAT IS SUBJECT TO TREAS. REG. SEC.
1.1275-4 (THE “CONTINGENT PAYMENT REGULATIONS”), AND (2) TO BE BOUND (IN THE
ABSENCE OF AN ADMINISTRATIVE DETERMINATION OR JUDICIAL RULING TO THE CONTRARY)
BY THE ISSUER’S DETERMINATION OF THE “COMPARABLE YIELD” AND “PROJECTED PAYMENT
SCHEDULE,” WITHIN THE MEANING OF THE CONTINGENT PAYMENT REGULATIONS, WITH
RESPECT TO THIS DEBENTURE. A HOLDER OF NOTES MAY OBTAIN THE ISSUE PRICE,
AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, YIELD TO MATURITY, COMPARABLE
YIELD AND PROJECTED PAYMENT SCHEDULE (DETERMINED BY CAPITALSOURCE INC. PURSUANT
TO TREAS. REG. SEC. 1.1275-4) OF, FOR OR ON THE NOTES, BY REGISTERED OR
CERTIFIED MAIL IN A POST OFFICE LETTER BOX OR SENT BY TELECOPIER TRANSMISSION
ADDRESSED AS FOLLOWS: TO CAPITALSOURCE INC., 4445 WILLARD AVENUE, 12TH FLOOR,
CHEVY CHASE, MARYLAND 20815, TELECOPIER NO.: 301-841-2375, ATTENTION: CHIEF
FINANCIAL OFFICER.

A-2

 

CAPITALSOURCE INC.

3.5%SENIOR CONVERTIBLE DEBENTURE DUE 2034

	 	 	 
	CUSIP: 14055X AC 6
	 	 
	ISIN: US14055XAC65
	 	 
	 
	 	 
	No. 1

	 	$300,000,000

     CapitalSource Inc., a corporation duly organized and validly existing
under the laws of the State of Delaware (herein called the “Company”, which
term includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to CEDE & CO. or its
registered assigns, the principal sum set forth on Schedule I hereto on July
15, 2034 at the office or agency of the Company maintained for that purpose in
accordance with the terms of the Indenture, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts, and to pay interest, semiannually on
January 15 and July 15 of each year, commencing January 15, 2005, on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum of 3.5%, from the January 15 or July 15, as the case may be, next
preceding the date of this Debenture to which interest has been paid or duly
provided for, unless the date hereof is a date to which interest has been paid
or duly provided for, in which case from the date of this Debenture, or unless
no interest has been paid or duly provided for on the Debentures, in which case
from July 7, 2004 until payment of said principal sum has been made or duly
provided for. Contingent Interest, if any, will accrue for any six month
Interest Period and be payable to holders of this Debenture on the applicable
Interest Payment Date to the person in whose name this Debenture is registered
on the corresponding record date. Except as otherwise provided in the
Indenture, the interest payable on the Debenture pursuant to the Indenture on
any January 15 or July 15 will be paid to the Person entitled thereto as it
appears in the Debenture Register on the Regular Record Date, which shall be
the January 1 or July 1 (whether or not a Business Day) next preceding such
January 15 or July 15, as provided in the Indenture; provided that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. The Company shall pay interest (i) on any Debentures in
certificated form by check mailed to the address of the Person entitled thereto
as it appears in the Debenture Register (or, upon written notice, by wire
transfer in immediately available funds, if such Person is entitled to interest
on Debentures with an aggregate principal amount in excess of $2,000,000) or
(ii) on any Global Debenture by wire transfer of immediately available funds to
the account of the Depositary or its nominee.

     Contingent Interest will accrue on each Debenture during an Interest
Period, beginning with the Interest Period commencing on July 15, 2011, if the
average Trading Price of the Debentures during the five consecutive Trading
Days immediately preceding such Interest Period equals or exceeds 130% of the
principal amount of the Debentures. If Contingent Interest accrues during an
Interest Period pursuant to the preceding sentence, the amount of Contingent
Interest payable with respect to such Interest Period per $1,000 principal
amount of Debentures shall equal 0.375% of the average Trading

A-3

 

Price during the applicable five Trading Day period immediately preceding
such Interest Period.

     The Company promises to pay interest on overdue principal and (to the
extent that payment of such interest is enforceable under applicable law)
Interest at the rate of 3.5% per annum.

     Reference is made to the further provisions of this Debenture set forth on
the reverse hereof, including, without limitation, provisions giving the holder
of this Debenture the right to convert this Debenture into Common Stock of the
Company on the terms and subject to the limitations referred to on the reverse
hereof and as more fully specified in the Indenture. Such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.

     This Debenture shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York (including Section 5-1401 of
the New York General Obligations Law or any successor to such statute).

     This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.

A-4

 

GUARANTEES

     For value received, each of the undersigned hereby unconditionally
guarantees, jointly and severally, to the holder of this Debenture the payment
of principal of, and Interest on this Debenture in the amounts and at the time
when due and Interest on the overdue principal and Interest, if any, of this
Debenture, if lawful, and the payment of all other obligations of the Company
under the Indenture or the Debentures, to the holder of this Debenture and the
Trustee, all in accordance with and subject to the terms and limitations of
this Debenture and Article 15 of the Indenture. These Guarantees will not
become effective until the Trustee duly executes the certificate of
authentication on this Debenture.

	 	 	 	 	 	 	 
	 	 	CAPITALSOURCE HOLDINGS LLC
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	 	 	 	 	
 
	

	 	Name:
	 	 	 	Steven A. Museles
	

	 	 	 	 	 	Senior Vice President
	 
	 	 	 	 	 	 
	 	 	CAPITALSOURCE FINANCE LLC
	 
	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	 	 	 	 	
 
	

	 	Name:
	 	 	 	Steven A. Museles
	

	 	 	 	 	 	Senior Vice President

A-5

 

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

	 	 	 	 	 
	 	 	CAPITALSOURCE INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	 	 	Steven A. Museles
	

	 	 	 	Senior Vice President

July 7, 2004

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

THIS IS ONE OF THE DEBENTURES DESCRIBED IN THE WITHIN-NAMED INDENTURE.

	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION

as Trustee
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	 	 	Authorized Signatory

A-6

 

FORM OF REVERSE OF DEBENTURE

CAPITALSOURCE INC.

3.5% SENIOR CONVERTIBLE DEBENTURE DUE 2034

     This Debenture is one of a duly authorized issue of Debentures of the
Company, designated as its 3.5% Senior Convertible Debentures due 2034 (herein
called the “Debentures”), limited in aggregate principal amount to
$330,000,000, issued and to be issued under and pursuant to an Indenture dated
as of July 7, 2004 (herein called the “Indenture”), among the Company,
CapitalSource Holdings LLC and CapitalSource Finance LLC, as guarantors (herein
each called a “Guarantor” and collectively called the “Guarantors”), and U.S.
Bank National Association, as trustee (herein called the “Trustee”), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company, the Guarantors and the
holders of the Debentures.

     In case an Event of Default shall have occurred and be continuing, the
principal of and accrued Interest on all Debentures may be declared by either
the Trustee or the holders of not less than 25% in aggregate principal amount
of the Debentures then outstanding, and upon said declaration shall become due
and payable in the manner, with the effect and subject to the conditions
provided in the Indenture.

     The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of at least a majority in aggregate principal
amount of the Debentures at the time outstanding, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or
modifying in any manner the rights of the holders of the Debentures; provided
that no such supplemental indenture shall (A) extend the Stated Maturity of any
Debenture, or (B) reduce the rate or extend the time for payment of Interest
thereon, or (C) reduce the principal amount thereof, or (D) reduce any amount
payable on redemption or repurchase thereof, or (E) impair the right of any
Debentureholder to institute suit for the payment thereof, or (F) make the
principal thereof or Interest thereon payable in any coin or currency other
than that provided in the Debentures, or (G) affect the obligation of the
Company to redeem any Debenture on a Redemption Date in a manner adverse to the
holders of Debentures, or (H) affect the obligation of the Company to
repurchase any Debenture upon the happening of a Fundamental Change in a manner
adverse to the holders of Debentures, or (I) affect the obligation of the
Company to repurchase any Debenture on a Company Repurchase Date in a manner
adverse to the holders of Debentures, or (J) subject to the terms set forth
herein and in the Indenture, including Section 14.07 of the Indenture, impair
or adversely affect the conversion rights of holders of the Debentures;
provided, however, that the provisions of Section 14.01(a)(iii) of the
Indenture may be amended or modified with the consent of the holders of at
least a majority in aggregate principal amount of Debentures at the time
outstanding if the Board of Directors of the Company determines in good faith

A-7

 

that such change is necessary to preserve the accounting treatment of the
Debentures in effect on July 1, 2004; or (K) reduce the number of shares of
Common Stock, the amount of cash or the amount of other property receivable
upon conversion, in each case, without the consent of the holder of each
Debenture so affected, or (L) modify any of the provisions of Section 10.02 of
the Indenture or Section 6.07 thereof, except to increase any such percentage
or to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the holder of each Debenture so
affected, or (M) reduce the quorum or voting requirements set forth in Article
9 of the Indenture or (N) reduce the aforesaid percentage of Debentures, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Debentures then outstanding. Subject
to the provisions of the Indenture, the holders of a majority in aggregate
principal amount of the Debentures at the time outstanding may on behalf of the
holders of all of the Debentures waive any past default or Event of Default
under the Indenture and its consequences except (A) a default in the payment of
Interest on or the principal of any of the Debentures, (B) a failure by the
Company to convert any Debentures into Common Stock, cash or a combination of
cash and Common Stock of the Company, (C) a default in the payment of the
Redemption Price pursuant to Article 3 of the Indenture, (D) a default in the
payment of the Company Repurchase Price or Fundamental Change Repurchase Price
pursuant to Article 3 of the Indenture, or (E) a default in respect of a
covenant or provision of the Indenture which under Article 10 of the Indenture
cannot be modified or amended without the consent of the holders of each or all
Debentures then outstanding or affected thereby. Any such consent or waiver by
the holder of this Debenture (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all future holders
and owners of this Debenture and any Debentures which may be issued in exchange
or substitution hereof, irrespective of whether or not any notation thereof is
made upon this Debenture or such other Debentures.

     No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and Interest on this
Debenture at the place, at the respective times, at the rate and in the coin or
currency herein prescribed.

     Interest on the Debentures shall be computed on the basis of a 360-day
year of twelve 30-day months.

     The Debentures are issuable in fully registered form, without interest
coupons, in denominations of $1,000 principal amount and any multiple of
$1,000. At the office or agency of the Company referred to on the face hereof,
and in the manner and subject to the limitations provided in the Indenture,
without payment of any service charge but with payment of a sum sufficient to
cover any tax, assessment or other governmental charge that may be imposed in
connection with any registration or exchange of Debentures, Debentures may be
exchanged for a like aggregate principal amount of Debentures of any other
authorized denominations.

     At any time on or after July 15, 2011 and prior to maturity, the
Debentures may be redeemed at the option of the Company, in whole or in part,
in cash upon mailing a

A-8

 

notice of such redemption not less than 30 days but not more than 60 days
before the Redemption Date to the holders of Debentures at their last
registered addresses, all as provided in the Indenture, at a Redemption Price
equal to 100% of the principal amount of debentures being redeemed plus accrued
and unpaid Interest to, but excluding, the Redemption Date; provided that if
the applicable Redemption Date is an Interest Payment Date, the Interest
payable on such Interest Payment Date shall be paid on such Interest Payment
Date to the holders of record of such Debentures on the applicable Record Date
instead of the holders surrendering such Debentures for redemption on such
date.

     In no event will any Security be redeemable at the option of the Company
before July 15, 2011.

     The Company may not give notice of any redemption of the Debentures if a
default in the payment of Interest on the Debentures has occurred and is
continuing.

     The Debentures are not subject to redemption through the operation of any
sinking fund.

     If a Fundamental Change occurs at any time prior to maturity of the
Debentures, each holder shall have the right, at such holder’s option, to
require the Company to repurchase this Debenture for cash, or subject to
certain conditions, Common Stock, on a Fundamental Change Repurchase Date,
specified by the Company, which shall be no later than 30 Business Days after
notice thereof, at a Fundamental Change Repurchase Price equal to at least 100%
of the principal amount thereof, together with accrued Interest to, but
excluding, the Fundamental Change Repurchase Date. The Company shall mail to
all holders of record of the Debentures a notice of the occurrence of a
Fundamental Change and of the repurchase right arising as a result thereof on
or before the 30th day after the occurrence of such Fundamental Change. For a
Debenture to be so repurchased at the option of the holder, the Company must
receive at the office or agency of the Company maintained for that purpose in
accordance with the terms of the Indenture, such Debenture with the form
entitled “Form of Fundamental Change Repurchase Notice” on the reverse thereof
duly completed, together with such Debenture, duly endorsed for transfer at any
time prior to the close of business on the Business Day immediately preceding
the Fundamental Change Repurchase Date.

     Subject to the terms and conditions of the Indenture, the Company shall
become obligated to repurchase, at the option of the holder, all or any portion
of the Debentures held by such holder on July 15, 2011, July 15, 2014, July 15,
2019, July 15, 2024, and July 15, 2029 in integral multiples of $1,000 at a
Company Repurchase Price of 100% of the principal amount, plus any accrued and
unpaid Interest on such Debenture to but excluding the Company Repurchase Date.
To exercise such right, a holder shall deliver to the Company such Debenture
with the form entitled “Form of Company Repurchase Election” on the reverse
thereof duly completed, together with the Debenture, duly endorsed for
transfer, at any time from the opening of business on the 20th Business Day
prior to such Company Repurchase Date until the close of business on the
Business Day immediately preceding the Company Repurchase Date, and shall
deliver, or arrange for

A-9

 

book-entry transfer of, the Debentures to the Trustee (or other Paying
Agent appointed by the Company) as set forth in the Indenture.

     The Company Repurchase Price to be paid on any of July 15, 2011, July 15,
2014, July 15, 2019, July 15, 2024 and July 15, 2029 shall be paid in cash and
the Fundamental Change Repurchase Price to be paid on any Fundamental Change
Repurchase Date shall be paid in cash or Common Stock, subject to the terms and
conditions of the Indenture.

     Holders have the right to withdraw any Repurchase Election by delivering
to the Trustee (or other Paying Agent appointed by the Company) a written
notice of withdrawal up to the close of business on the Business Day
immediately preceding the Repurchase Date, all as provided in the Indenture.

     If money or Common Stock, if allowed under the Indenture, sufficient to
pay the Repurchase Price with respect to all Debentures or portions thereof to
be repurchased as of any Repurchase Date is deposited with the Trustee (or
other Paying Agent appointed by the Company), then on and after such Repurchase
Date, such Debentures will cease to be outstanding, Interest will cease to
accrue on such Debentures (or portions thereof), and the holder thereof shall
have no other rights as such other than the right to receive the Repurchase
Price upon surrender of such Debenture.

     Subject to the occurrence of certain events and in compliance with the
provisions of the Indenture, prior to the Stated Maturity of the Debentures,
the holder hereof has the right, at its option, to convert each $1,000
principal amount of the Debentures into 31.4614 shares of the Company’s Common
Stock (a Conversion Price of approximately $31.78 per share), as such shares
shall be constituted at the date of conversion and subject to adjustment from
time to time as provided in the Indenture, upon surrender of this Debenture
with the form entitled “Form of Conversion Notice” on the reverse hereof duly
completed, to the Company at the office or agency of the Company maintained for
that purpose in accordance with the terms of the Indenture, or at the option of
such holder, the Corporate Trust Office, and, unless the shares issuable on
conversion are to be issued in the same name as this Debenture, duly endorsed
by, or accompanied by instruments of transfer in form satisfactory to the
Company duly executed by, the holder or by his duly authorized attorney. The
Company will notify the holder thereof of any event triggering the right to
convert the Debentures as specified above in accordance with the Indenture.

     If the Company (i) is a party to a consolidation, merger, statutory share
exchange or combination, (ii) reclassifies the Common Stock, or (iii) sells or
conveys its properties and assets substantially as an entirety to any Person,
the right to convert a Debenture into shares of Common Stock will be changed
into a right to convert it into the kind or amount of cash, securities or other
property receivable upon such event, in each case in accordance with the
Indenture.

     No adjustment in respect of Interest on any Debenture converted or
dividends on any shares issued upon conversion of such Debenture will be made
upon any conversion except as set forth in the next sentence. If this
Debenture (or portion hereof) is

A-10

 

surrendered for conversion during the period from the close of business on
any Record Date for the payment of Interest to the opening of business on the
immediately following Interest Payment Date, this Debenture (or portion hereof
being converted) must be accompanied by payment, in immediately available funds
or other funds acceptable to the Company, of an amount equal to the Interest
(excluding Contingent Interest and Additional Amounts, if any) otherwise
payable on such Interest Payment Date on the principal amount being converted;
provided that no such payment shall be required (1) if the Company has
specified a Redemption Date that is after a Record Date and prior to the next
Interest Payment Date, (2) if the Company has specified a Repurchase Date
following a Fundamental Change that is after a record date and on or prior to
the next Interest Payment Date or (3) to the extent of any overdue Interest, if
any overdue Interest exists at the time of conversion with respect to such
Debenture.

     No fractional shares will be issued upon any conversion, but an adjustment
and payment in cash will be made, as provided in the Indenture, in respect of
any fraction of a share which would otherwise be issuable upon the surrender of
any Debenture or Debentures for conversion.

     A Debenture in respect of which a holder is exercising its right to
require repurchase upon a Fundamental Change or repurchase on a Repurchase Date
may be converted only if such holder withdraws its election to exercise such
right in accordance with the terms of the Indenture.

     Upon due presentment for registration of transfer of this Debenture at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Debenture or Debentures of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the limitations provided in the
Indenture, without charge except for any tax, assessment or other governmental
charge imposed in connection therewith.

     The Company, the Guarantors, the Trustee, any authenticating agent, any
Paying Agent, any Conversion Agent and any Debenture Registrar may deem and
treat the registered holder hereof as the absolute owner of this Debenture
(whether or not this Debenture shall be overdue and notwithstanding any
notation of ownership or other writing hereon made by anyone other than the
Company or any Debenture Registrar) for the purpose of receiving payment on or
account of the principal hereof and the Interest hereon, for the conversion
hereof and for all other purposes, and neither the Company nor the Trustee nor
any other authenticating agent nor any Paying Agent nor other Conversion Agent
nor any Debenture Registrar shall be affected by any notice to the contrary.
All payments made to or upon the order of such registered holder shall, to the
extent of the sum or sums paid, satisfy and discharge liability for monies
payable on this Debenture.

     No recourse for the payment of the principal of or Interest on this
Debenture, or for any claim based hereon or otherwise in respect hereof, and no
recourse under or upon any obligation, covenant or agreement of the Company or
any Guarantor in the Indenture or any supplemental indenture or in any
Debenture, or because of the creation of any

A-11

 

indebtedness represented thereby, or for any of the obligations of the
Guarantors under the Guarantees shall be had against any incorporator,
shareholder, member, employee, agent, officer or director or subsidiary, as
such, past, present or future, of the Company, any Guarantor, or of any
successor corporation or limited liability company, either directly or through
the Company, or any Guarantor, or any successor corporation or limited
liability company, whether by virtue of any constitution, statute or rule of
law or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by acceptance hereof and as part of the consideration for the
issue hereof, expressly waived and released.

     The Company agrees, and by acceptance of a Debenture, each beneficial
holder of a Debenture will be deemed to have agreed to treat the Debentures as
indebtedness of the Company for U.S. federal income tax purposes that are
subject to the regulations governing contingent payment debt instruments and to
be bound (in the absence of an administrative determination or judicial ruling
to the contrary) by the Company’s determination of the comparable yield and
projected payment schedule within the meaning of the regulations governing
contingent payment debt instruments.

     Terms used in this Debenture and defined in the Indenture are used herein
as therein defined.

A-12

 

ABBREVIATIONS

     The following abbreviations, when used in the inscription of the face of
this Debenture, shall be construed as though they were written out in full
according to applicable laws or regulations.

	 	 	 	 	 
	TEN COM -

	 	as tenants in common
	 	UNIF GIFT MIN ACT - ___ Custodian
___
	TEN ENT -

	 	as tenant by the entireties
	 	(Cust) (Minor)
	JT TEN -

	 	as joint tenants with
	 	under Uniform Gifts to Minors Act
	

	 	right of survivorship and
	 	                                      
	

	 	not as tenants in common
	 	         (State)

     Additional abbreviations may also be used though not in the above list.

A-13

 

FORM OF

CONVERSION NOTICE

	 	 	TO: CAPITALSOURCE INC.

U.S. BANK NATIONAL ASSOCIATION

     The undersigned registered owner of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or the portion thereof (which
is $1,000 or a multiple thereof) below designated, into shares of Common Stock
of CapitalSource Inc. and/or cash in accordance with the terms of the Indenture
referred to in this Debenture, and directs that the shares issuable and
deliverable and/or cash payable upon such conversion, together with any check
in payment for fractional shares and any Debentures representing any
unconverted principal amount hereof, be issued and delivered to the registered
holder hereof unless a different name has been indicated below. Capitalized
terms used herein but not defined shall have the meanings ascribed to such
terms in the Indenture. If shares, any portion of this Debenture not converted
or a check for cash payable are to be issued in the name of a person other than
the undersigned, the undersigned will provide the appropriate information below
and pay all transfer taxes payable with respect thereto. Any amount required
to be paid by the undersigned on account of Interest accompanies this
Debenture.

		
	Dated: 	 

	 	 	 
	 

	 	

	

	 	

	

	 	Signature(s)
	 
	 	 
	

	 	Signature(s) must be guaranteed by an
“eligible guarantor institution”
meeting the requirements of the
Debenture Registrar, which requirements
include membership or participation in
the Security Transfer Agent Medallion
Program (“STAMP”) or such other
“signature guarantee program” as may be
determined by the Debenture Registrar
in addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
	 
	 	 
	

	 	

	

	 	Signature Guarantee

A-14

 

NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of the Debenture in every particular without
alteration or enlargement or any change whatever.

     Fill in the registration of shares of Common Stock if to be issued, and
Debentures if to be delivered, other than to and in the name of the registered
holder:

	 	 	 
	

	 	

	

	 	(Name)
	 
	 	 
	

	 	

	

	 	(Street Address)
	 
	 	 
	

	 	

	

	 	(City, State and Zip Code)
	 
	 	 
	

	 	

	

	 	Please print name and address
	 
	 	 
	

	 	Principal amount to be converted
	

	 	(if less than all):
	 
	 	 
	

	 	$
	

	 	

	

	 	Social Security or Other Taxpayer

Identification Number:
			
	

	 	 

A-15

 

FORM OF

FUNDAMENTAL CHANGE REPURCHASE NOTICE

	TO:	 	 CAPITALSOURCE INC.

U.S. BANK NATIONAL ASSOCIATION

     The undersigned registered owner of this Debenture hereby irrevocably
acknowledges receipt of a notice from CapitalSource Inc. (the “Company”) as to
the occurrence of a Fundamental Change with respect to the Company and requests
and instructs the Company to repurchase the entire principal amount of this
Debenture, or the portion thereof (which is $1,000 or a multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Debenture at the price equal to at least 100% of such entire principal amount
or portion thereof, together with accrued Interest to, but excluding, the
Fundamental Change Repurchase Date, to the registered holder hereof.
Capitalized terms used herein but not defined shall have the meanings ascribed
to such terms in the Indenture.

		
	Dated: 	______________________

	 	 	 
	

	 	                                                                            
	 
	 	 
	

	 	                                                                            
	

	 	Signature(s)

NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of the Debenture in every particular without
alteration or enlargement or any change whatever.

		
	Debenture Certificate Number (if applicable): 	___________________________________

		
	Principal amount to be repurchased (if less than all): 	___________________________________

		
	Social Security or Other Taxpayer Identification Number: 	___________________________________

A-16

 

FORM OF

COMPANY REPURCHASE ELECTION

	TO:	 	CAPITALSOURCE INC.

U.S. BANK NATIONAL ASSOCIATION

     The undersigned registered owner of this Debenture hereby irrevocably
acknowledges receipt of a notice from CapitalSource Inc. (the “Company”)
regarding the right of holders to elect to require the Company to repurchase
the Debentures and requests and instructs the Company to repay the entire
principal amount of this Debenture, or the portion thereof (which is $1,000 or
an integral multiple thereof) below designated, in accordance with the terms of
the Indenture at the price of 100% of such entire principal amount or portion
thereof, together with accrued Interest to, but excluding, the Company
Repurchase Date, to the registered holder hereof. Capitalized terms used
herein but not defined shall have the meanings ascribed to such terms in the
Indenture. The Debentures shall be repurchased by the Company as of the
Company Repurchase Date pursuant to the terms and conditions specified in the
Indenture.

		
	Dated: 	______________________

	 	 	 
	

	 	                                                                            
	 
	 	 
	

	 	                                                                            
	

	 	Signature(s)

NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of the Debenture in every particular without
alteration or enlargement or any change whatever.

		
	Debenture Certificate Number (if applicable): 	___________________________________

		
	Principal amount to be repurchased (if less than all): 	___________________________________

		
	Social Security or Other Taxpayer Identification Number: 	___________________________________

A-17

 

ASSIGNMENT

     For value received                                       hereby sell(s) assign(s)
and transfer(s) unto                                                          (Please insert social
security or other Taxpayer Identification Number of assignee) the within
Debenture, and hereby irrevocably constitutes and appoints
                                                          attorney to transfer said Debenture on
the books of the Company, with full power of substitution in the premises.

     In connection with any transfer of the Debenture prior to the expiration
of the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant
to a registration statement that has been declared effective under the
Securities Act), the undersigned confirms that such Debenture is being
transferred:

	o 	 	To CapitalSource Inc. or a subsidiary thereof; or
	 
	o 	 	To a “qualified institutional buyer” in
compliance with Rule 144A under the Securities Act of 1933,
as amended; or
	 
	o 	 	Pursuant to and in compliance with Rule 144
under the Securities Act of 1933, as amended; or
	 
	o 	 	Pursuant to a Registration Statement which has
been declared effective under the Securities Act of 1933, as
amended, and which continues to be effective at the time of
transfer;

and unless the Debenture has been transferred to CapitalSource Inc. or a
subsidiary thereof, the undersigned confirms that such Debenture is not being
transferred to an “affiliate” of the Company as defined in Rule 144 under the
Securities Act of 1933, as amended.

     Unless one of the boxes is checked, the Trustee will refuse to register
any of the Debentures evidenced by this certificate in the name of any person
other than the registered holder thereof.

		
	Dated: 	______________________

	 	 	 
	

	 	                                                                            
	 
	 	 
	

	 	                                                                            
	

	 	Signature(s)

A-18

 

	 	 	 
	

	 	Signature(s) must be guaranteed by an
“eligible guarantor institution”
meeting the requirements of the
Debenture Registrar, which requirements
include membership or participation in
the Security Transfer Agent Medallion
Program (“STAMP”) or such other
“signature guarantee program” as may be
determined by the Debenture Registrar
in addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
	 
	 	 
	

	 	                                                                            
	

	 	Signature Guarantee

NOTICE: NOTICE: The above signatures of the holder(s) hereof must correspond
with the name as written upon the face of the Debenture in every particular
without alteration or enlargement or any change whatever.

A-19

 

Schedule I

CAPITALSOURCE INC.

3.5% Senior Convertible Debenture due 2034

No. 1

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Authorized Signature
	 	 	 	 	 	 	Notation Explaining Principal	 	of Trustee or
	Date
	 	Principal Amount
	 	Amount Recorded
	 	Custodian

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

	
	 	
	 	
	 	

A-20exv4w2

 

EXECUTION COPY

Exhibit 4.2

CapitalSource Inc.

3.5% Senior Convertible Debentures due 2034

REGISTRATION RIGHTS AGREEMENT

July 7, 2004

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

as Representative of the Initial Purchasers

Ladies and Gentlemen:

     CapitalSource Inc., a Delaware corporation (the “Company”), proposes to
issue and sell (such issuance and sale, the “Initial Placement”) to the Initial
Purchasers (as defined below), upon the terms set forth in a purchase
agreement, dated July 1, 2004 (the “Purchase Agreement”), $300,000,000
principal amount of its 3.5% Senior Convertible Debentures due 2034 (together
with the related Guarantees (as defined below) of the Guarantors (as defined
below), the “Firm Securities”). In addition, the Company has granted to the
Initial Purchasers an option to purchase up to an additional $30,000,000
principal amount of the Company’s 3.5% Senior Convertible Debentures due 2034
(together with the related Guarantees of the Guarantors, the “Additional
Securities” and, collectively with the Firm Securities, the “Securities”). The
Securities will be fully and unconditionally guaranteed as to due and punctual
payment (the “Guarantees”) by CapitalSource Holdings LLC and CapitalSource
Finance LLC (together, the “Guarantors”). The Securities will be convertible
into shares of Common Stock (as defined below), at the conversion price set
forth in the Offering Memorandum (as defined below), as the same may be
adjusted from time to time pursuant to the Indenture (as defined below). As an
inducement to you to enter into the Purchase Agreement and in satisfaction of a
condition to your obligations thereunder, the Company and the Guarantors agree
with you, (i) for your benefit and (ii) for the benefit of the Holders (as
defined below) from time to time of the Securities and the shares of Common
Stock issuable upon conversion of the Securities, as follows:

          1. Definitions. Capitalized terms used herein without definition
shall have the respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized terms shall have the
following meanings:

     "Additional Amounts” has the meaning set forth in Section 2(e) hereof.

     "Additional Amounts Payment Date” means each January 15 and July 15.

     "Affiliate” of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified

 

 

person. For the purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling,” “controlled by” and “under
common control with”), as used with respect to any person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person whether through the
ownership of voting securities or by agreement or otherwise.

     “August 2002 Registration Agreement” means the Amended and Restated
Registration Rights Agreement, dated as of August 30, 2002, by and among the
Company and the holders of its securities party thereto.

     “Business Day” has the meaning set forth in the Indenture.

     “Closing Date” means July 7, 2004.

     “Common Stock” means the common stock, par value $0.01 per share, of the
Company, as it exists on the date of this Agreement and any other shares of
capital stock or other securities of the Company into which such Common Stock
may be reclassified or changed, together with any and all other securities
which may from time to time be issuable upon conversion of Securities.

     “Company” has the meaning set forth in the preamble hereto.

     “DTC” has the meaning set forth in the Indenture.

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

     “Holder” means a person who is a registered holder or beneficial owner of
any registrable Securities (including the Initial Purchasers).

     “Guarantee” has the meaning set forth in the preamble hereto.

     “Guarantors” means CapitalSource Holdings LLC and CapitalSource Finance
LLC.

     “Holder Information” with respect to any Holder means information with
respect to such Holder required to be included in any Shelf Registration
Statement or the related Prospectus pursuant to the Securities Act and which
information is included therein in reliance upon and in conformity with
information furnished to the Company and the Guarantors in writing by such
Holder for inclusion therein.

     “Indenture” means the Indenture relating to the Securities, dated July 7,
2004, among the Company, the Guarantors and U.S. Bank National Association, as
trustee, as the same may be amended from time to time in accordance with the
terms thereof.

     “Initial Placement” has the meaning set forth in the preamble hereto.

     “Initial Purchasers” mean Citigroup Global Markets Inc. and the other
initial purchasers named in and a party to the Purchase Agreement.

2

 

     “Majority Holders” means the holders of a majority of the then outstanding
aggregate principal amount of (a) Securities being registered under a Shelf
Registration Statement and (b) any other securities being registered under such
Shelf Registration Statement pursuant to a Parity Agreement; provided that
holders of shares of Common Stock issued upon conversion of Securities or such
other securities being registered pursuant to a Parity Agreement shall be
deemed to be holders of the aggregate principal amount of Securities or such
other securities being registered pursuant to a Parity Agreement converted into
such Common Stock; and provided further, that Securities, such other securities
being registered pursuant to a Parity Agreement or shares of Common Stock which
have been sold or otherwise transferred pursuant to the Shelf Registration
Statement shall not be included in the calculation of Majority Holders.

     “March 2004 Registration Agreement” means the Registration Rights
Agreement, dated as of March 19, 2004, by and among the Company, the Guarantors
and J.P. Morgan Securities Inc., as representative of the Initial Purchasers
(as defined therein) and for the benefit of the holders of the Company’s Senior
Convertible Debentures due 2034.

     “NASD” has the meaning set forth in Section 3(i) hereof.

     “NASD Rules” means the rules and regulation promulgated by the NASD.

     “Notice and Questionnaire” means a Selling Securityholder Notice and
Questionnaire substantially in the form of Annex A to the Offering Memorandum.

     “Notice Holder” shall mean, on any date, any Holder of Transfer Restricted
Securities that has delivered a completed and signed Notice and Questionnaire
to the Company on or prior to such date.

     “Offering Memorandum” means the Offering Memorandum as defined in the
Purchase Agreement.

     “Parity Agreement” has the meaning set forth in Section 8(a) hereof.

     “Person” has the meaning set forth in the Indenture.

     “Prospectus” means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities or shares of Common Stock
issuable upon conversion thereof covered by such Shelf Registration Statement,
including all documents incorporated or deemed to be incorporated by reference
in such prospectus.

     “Purchase Agreement” has the meaning set forth in the preamble hereto.

     “Record Holder” means each person who is registered on the books of the
registrar as the holder of Securities at the close of business on the January 1
or July 1 immediately preceding the relevant Additional Amounts Payment Date.

3

 

     “Registration Default” has the meaning set forth in Section 2(e) hereof.

     “Representative” means Citigroup Global Markets Inc., as representative of
the Initial Purchasers.

     “Rule 144” means Rule 144 under the Securities Act (or any similar
provision then in force).

     “Rule 144A” means Rule 144A under the Securities Act (or any successor
provision promulgated by the SEC).

     “Rule 144(k)” means Rule 144(k) under the Securities Act (or any successor
provision promulgated by the SEC).

     “Rule 415” means Rule 415 under the Securities Act (or any successor
provision promulgated by the SEC).

     “SEC” means the Securities and Exchange Commission.

     “Securities” has the meaning set forth in the preamble hereto.

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

     “Seller Post-Effective Amendment” has the meaning set forth in Section
2(b)(ii) hereof.

     “Shelf Registration” means a registration effected pursuant to Section 2
hereof.

     “Shelf Registration Period” has the meaning set forth in Section 2(c)
hereof.

     “Shelf Registration Statement” means any “shelf” registration statement of
the Company and the Guarantors filed pursuant to the provisions of Section 2
hereof which covers the Transfer Restricted Securities on Form S-3 or on
another appropriate form (as determined by the Company) for an offering to be
made on a delayed or continuous basis pursuant to Rule 415 and all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all documents incorporated or deemed to be incorporated by
reference therein.

     “Suspension Period” has the meaning set forth in Section 2(d) hereof.

     “Transfer Restricted Securities” means each Security and each share of
Common Stock issuable upon conversion thereof until the earliest of the date on
which such Security or share of Common Stock, as the case may be, (i) has been
transferred pursuant to a Shelf Registration Statement or another registration
statement covering such Security or share of Common Stock which has been filed
with the SEC pursuant to the Securities Act, in either case after such
registration statement has become effective and while such registration
statement is effective under the Securities Act, (ii) has been transferred
pursuant to Rule 144 under circumstances in which any legend borne by such
Securities or shares of Common Stock relating to restrictions on

4

 

transferability thereof, under the Securities Act or otherwise, is
removed, (iii) may be sold or transferred pursuant to Rule 144(k) or (iv) the
date on which such Security or Common Stock ceases to be outstanding.

     "Trustee” means U.S. Bank National Association, the trustee with respect
to the Securities under the Indenture.

     All references in this Agreement to financial statements and schedules and
other information which is “contained,” “included,” or “stated” in the Shelf
Registration Statement, any preliminary Prospectus or Prospectus (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information incorporated or deemed
to be incorporated by reference in such Shelf Registration Statement,
preliminary Prospectus or Prospectus, as the case may be; and all references in
this Agreement to amendments or supplements to the Shelf Registration
Statement, any preliminary Prospectus or Prospectus shall be deemed to mean and
include any document filed with the SEC under the Exchange Act, after the date
of such Shelf Registration Statement, preliminary Prospectus or Prospectus, as
the case may be, which is incorporated or deemed to be incorporated by
reference therein (which shall not include, unless incorporated therein,
documents and information furnished and not filed under applicable SEC rules).

          2. Shelf Registration Statement.

          (a) The Company and the Guarantors shall, at the Company’s expense,
prepare and file with the SEC within 90 days following the Closing Date a Shelf
Registration Statement with respect to resales of the Transfer Restricted
Securities by each Holder that is a Notice Holder from time to time on a
delayed or continuous basis pursuant to Rule 415 and in accordance with the
methods of distribution elected by such Notice Holders in a Notice and
Questionnaire and thereafter shall use its best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act within
180 days after the Closing Date; provided that if any Additional Securities are
issued and the date on which such Additional Securities are issued occurs after
the Closing Date, the Company will take such steps, prior to the effective date
of the Shelf Registration Statement, to ensure that such Additional Securities
and the shares of Common Stock issuable upon conversion thereof are included in
the Shelf Registration Statement on the same terms as the Securities issued on
the Closing Date. The Company shall supplement or amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for the Shelf Registration Statement,
or by the Securities Act, the Exchange Act or the SEC.

          (b) (i) The Company shall take action to name each Holder that is a
Notice Holder as of the date that is 10 Business Days prior to the
effectiveness of the Shelf Registration Statement as a selling
securityholder in the Shelf Registration Statement at the time of its
effectiveness so that such Holder is permitted to deliver the Prospectus
forming a part thereof as of such time to purchasers of such Holder’s
Transfer Restricted Securities in accordance with applicable law. The
Company shall be under no obligation to name any Holder that is not a
Notice Holder as a selling securityholder in the Shelf Registration
Statement.

5

 

             (ii) (A)After the Shelf Registration Statement has become effective,
the Company shall, upon the request of any Holder of Transfer Restricted
Securities, promptly send a Notice and Questionnaire to such Holder and
the Company shall, after the date a completed and signed Notice and
Questionnaire is delivered to the Company, and subject to clause (B)
below, prepare and file with the SEC once (but not more than once) every
60 days (y) a supplement to the Prospectus or, if a post-effective
amendment to the Shelf Registration Statement is required by applicable
law in order to cause a Holder to be named as a selling securityholder in
the Shelf Registration Statement, a post-effective amendment to the Shelf
Registration Statement (a “Seller Post-Effective Amendment”) and (z) any
other document required by applicable law, so that the Holder delivering
such Notice and Questionnaire is named as a selling securityholder in the
Shelf Registration Statement and is permitted to deliver the Prospectus
to purchasers of such Holder’s Transfer Restricted Securities in
accordance with applicable law. If the Company files a Seller
Post-Effective Amendment, it shall use its best efforts to cause such
post-effective amendment to become effective under the Securities Act as
promptly as is practicable and in any event within 75 days of such
filing. Notwithstanding anything contained herein to the contrary, if a
Notice and Questionnaire is delivered to the Company during a Suspension
Period, the Company shall not be obligated to take the actions set forth
above until the termination of such Suspension Period.

                (B) Notwithstanding the requirements of clause (A) above, the
Company shall not be required to file more than one Seller Post-Effective
Amendment in any fiscal quarter, provided that this clause (B) shall not
relieve the Company of any obligations under clause (A) unless a Seller
Post-Effective Amendment is required by applicable law in order to cause
a Holder to be named as a selling securityholder in the Shelf
Registration Statement.

          (c) The Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective, supplemented and amended under the Securities
Act in order to permit the Prospectus forming a part thereof to be usable,
subject to Section 2(d), by all Notice Holders until all Transfer Restricted
Securities (A) have been transferred pursuant to a Shelf Registration Statement
or another registration statement covering such Security or share of Common
Stock which has been filed with the SEC pursuant to the Securities Act, in
either case after such registration statement has become effective and while
such registration statement is effective under the Securities Act, (B) have
been transferred pursuant to Rule 144 under circumstances in which any legend
borne by such Securities or shares of Common Stock relating to restrictions on
transferability thereof, under the Securities Act or otherwise, is removed or
(C) have ceased to be outstanding (in any such case, such period being called
the “Shelf Registration Period”). The Company will, (x) subject to Section
2(d), prepare and file with the SEC such amendments and post-effective
amendments to the Shelf Registration Statement as may be necessary to keep the
Shelf Registration Statement continuously effective for the Shelf Registration
Period, (y) subject to Section 2(d), cause the related Prospectus to be
supplemented by any required supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act and (z) comply in all material respects with the provisions of
the Securities Act with respect to the Shelf Registration Statement during the
Shelf Registration Period.

6

 

          (d) The Company may suspend the availability of any Shelf Registration
Statement and the use of any Prospectus (the period during which the
availability of any Shelf Registration Statement and any Prospectus may be
suspended herein referred to as the “Suspension Period”), without incurring any
obligation to pay Additional Amounts pursuant to Section 2(e), for a period not
to exceed 90 days in the aggregate during any 12-month period for valid
business reasons, to be determined by the Company in its sole judgment (which
shall not include the avoidance of the Company’s obligations hereunder),
including, without limitation, the acquisition or divestiture of assets,
pending corporate developments, public filings with the SEC and similar events;
provided that the Company promptly thereafter complies with the requirements of
Section 3(j) hereof, if applicable, and provided further that, if a Seller
Post-Effective Amendment is required by applicable law in order to cause a
Holder to be named as a selling securityholder in the Shelf Registration
Statement, the period of time between the filing and effectiveness of any
Seller Post-Effective Amendment shall not be deemed to be a Suspension Period
hereunder.

          (e) The Company and the Initial Purchasers agree that the Holders of
Transferred Restricted Securities will suffer damages, and it would not be
feasible to ascertain the extent of such damages with precision, if the Company
fails to fulfill its obligations under Section 2 hereof. Accordingly, if (i)
the Shelf Registration Statement is not filed with the SEC within 90 days after
the Closing Date, (ii) the Shelf Registration Statement has not been declared
effective by the SEC within 180 days after the Closing Date, (iii) the Shelf
Registration Statement is filed and declared effective but shall thereafter
cease to be effective (without being succeeded immediately by a replacement
Shelf Registration Statement filed and declared effective) or usable (including
as a result of a Suspension Period) for the offer and sale of Transfer
Restricted Securities for a period of time (including any Suspension Period and
excluding, if a Seller Post-Effective Amendment is required by applicable law
in order to cause a Holder to be named as a selling securityholder in the Shelf
Registration Statement, the period of time between the filing and effectiveness
of any Seller Post-Effective Amendment) which exceeds 90 days in the aggregate
in any 12-month period or (iv) the Company fails to perform its obligations set
forth in Section 2(b)(ii) within the time periods required therein (each such
event referred to in clauses (i) through (iv), a “Registration Default”), the
Company shall pay to each Notice Holder (who is also a Record Holder) (but only
to each affected Notice Holder under Section 2(b)(ii) in the case of clause
(iv)) during any period in which a Registration Default has occurred or is
continuing an amount (the “Additional Amounts”) equal to (i) one-quarter of one
percent (25 basis points) per annum of the outstanding principal amount of
Securities constituting Transfer Restricted Securities held by such Holder for
the period up to and including the 90th day during which such Registration
Default has occurred and is continuing and (ii) one-half of one percent (50
basis points) per annum of the outstanding principal amount of Securities
constituting Transfer Restricted Securities held by such Holder for the period
including and subsequent to the 91st day during which such Registration Default
has occurred and is continuing, it being understood that all calculations
pursuant to this sentence shall be carried out to five decimal places.
Following the cure of all Registration Defaults, Additional Amounts will cease
to accrue with respect to such Registration Defaults. All accrued Additional
Amounts shall be paid by the Company on each Additional Amounts Payment Date in
cash and Additional Amounts will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. The parties hereto agree that the
Additional Amounts provided for in this Section 2(e) constitute a reasonable
estimate of the damages that may be incurred by Notice Holders by reason of a

7

 

Registration Default and that such Additional Amounts are the only
monetary damages available to Notice Holders in the event of a Registration
Default.

          (f) All of the Company’s obligations (including, without limitation, the
obligation to pay Additional Amounts) set forth in the preceding paragraph
which are outstanding or exist with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full. Notwithstanding the foregoing, no
Additional Amounts shall accrue as to any Transfer Restricted Security from and
after the date such security is no longer a Transfer Restricted Security.
Additional Amounts shall not accrue to more than one Notice Holder with respect
to a Transfer Restricted Security at any one time.

          (g) Immediately upon the occurrence or the cure of a Registration Default,
the Company shall give (i) the Trustee, so long as the Securities remain
outstanding, and (ii) the transfer and paying agent for the Common Stock, in
the event any Notice Holder holds Common Stock issued upon conversion of
Securities, notice of such commencement or termination of the obligation to pay
Additional Amounts with regard to the Securities or the Common Stock, as the
case may be, the amount or applicable percentage thereof and the nature of the
default giving rise to such commencement or the event giving rise to such
termination, as the case may be (such notice to be contained in an Officer’s
Certificate (as such term is defined in the Indenture)), and prior to receipt
of such Officer’s Certificate the Trustee and the transfer and paying agent
shall be entitled to assume that no such commencement or termination has
occurred, as the case may be.

          3. Registration Procedures. In connection with any Shelf
Registration Statement, the following provisions shall apply:

          (a) The Company shall (i) furnish to the Initial Purchasers, within a
reasonable period of time, but in any event within three Business Days, prior
to the filing thereof with the SEC to afford the Initial Purchasers and their
counsel a reasonable opportunity for review, a copy of each Shelf Registration
Statement, and each amendment thereof, and a copy of each Prospectus, and each
amendment or supplement thereto (excluding amendments caused by the filing of a
report under the Exchange Act), and shall reflect in each such document, when
so filed with the SEC, such comments as the Initial Purchasers may reasonably
propose, except to the extent the Company reasonably determines, on the advice
of counsel, it to be inadvisable or inappropriate to reflect such comments
therein, and (ii) include information regarding the Notice Holders and the
methods of distribution they have elected for their Transfer Restricted
Securities provided to the Company in Notice and Questionnaires as necessary to
permit such distribution by the methods specified therein. Each Notice Holder
who sells, transfers or disposes of Transfer Restricted Securities pursuant to
the Shelf Registration Statement shall, as a condition to the obligations of
the Company hereunder, do so only in accordance with the terms of this
Agreement, the methods of distribution elected by such Notice Holder, the
Securities Act and the Exchange Act.

          (b) Subject to Section 2(d), the Company shall ensure that (i) any Shelf
Registration Statement and any amendment thereto and any Prospectus forming a
part thereof and any amendment or supplement thereto comply in all material
respects with the Securities Act

8

 

and the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any Prospectus forming a part of any Shelf Registration
Statement, and any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation with respect to any Holder Information.

          (c) The Company, as promptly as reasonably practicable (but in any event
within two Business Days), shall notify the Initial Purchasers and each Notice
Holder and, if requested by you or any such Holder, confirm such notice in
writing:

               (i) when a Shelf Registration Statement or any amendment thereto or
any Prospectus or any amendment or supplement thereto has been filed with
the SEC and when the Shelf Registration Statement or any post-effective
amendment thereto has become effective;

               (ii) of any request, following effectiveness of the Shelf
Registration Statement under the Securities Act, by the SEC or any other
federal or state governmental authority for amendments or supplements to
the Shelf Registration Statement or the Prospectus or for additional
information (other than any such request relating to a review of the
Company’s Exchange Act filings);

               (iii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of
the Shelf Registration Statement or of any order preventing or suspending
the use of any Prospectus or the initiation or threat of any proceedings
for that purpose;

               (iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification or exemption from qualification of
the Transfer Restricted Securities included in any Shelf Registration
Statement for sale in any jurisdiction or the initiation or threat of any
proceeding for that purpose;

               (v) of the occurrence of any event or the existence of any condition
or any information becoming known that requires the making of any changes
in the Shelf Registration Statement or the Prospectus or any document
incorporated by reference therein so that, as of such date, the
statements therein are not misleading and the Shelf Registration
Statement or the Prospectus or any document incorporated by reference
therein, as the case may be, does not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading;

               (vi) of the Company’s determination that a post-effective amendment
to the Shelf Registration Statement is necessary; and

9

 

               (vii) of the commencement (including as a result of any of the
events or circumstances described in paragraphs (ii) through (vi) above)
and termination of any Suspension Period.

          (d) The Company shall use its best efforts to obtain (i) the withdrawal of
any order suspending the effectiveness of any Shelf Registration Statement and
the use of any related Prospectus and (ii) the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Transfer
Restricted Securities for offer or sale in any jurisdiction in which they have
been qualified for sale, in each case at the earliest possible time, and shall
provide notice to each Notice Holder and the Initial Purchasers of the
withdrawal of any such orders or suspensions.

          (e) The Company shall promptly furnish to each Notice Holder and the
Initial Purchasers, without charge, at least one copy of any Shelf Registration
Statement and any post-effective amendment thereto, excluding all documents
incorporated or deemed to be incorporated therein by reference and all exhibits
thereto (unless requested by such Notice Holder).

          (f) The Company shall, during the Shelf Registration Period, promptly
deliver to the Initial Purchasers, each Notice Holder and any broker-dealers
acting on their behalf, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in any Shelf Registration
Statement, and any amendment or supplement thereto, as such person may
reasonably request, except as provided in Sections 2(d) and 3(s) hereof; and
the Company hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Notice Holders in connection with the
offering and sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto in the manner set forth
therein.

          (g) Prior to any offering of Transfer Restricted Securities pursuant to
any Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Notice Holders and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Transfer Restricted Securities for offer and sale, under
the securities or blue sky laws of such jurisdictions within the United States
as any such Notice Holders reasonably request and shall maintain such
qualification in effect so long as required during the Shelf Registration
Period and do any and all other acts or things necessary or advisable to enable
the offer and sale in such jurisdictions of the Transfer Restricted Securities
covered by such Shelf Registration Statement; provided, however, that the
Company will not be required to (A) qualify generally to do business as a
foreign corporation or as a dealer in securities in any jurisdiction where it
is not then so qualified or to (B) take any action which would subject it to
service of process or taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.

          (h) The Company shall cooperate with the Notice Holders to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities (to the extent certificates for the Securities or the
Common Stock issued upon conversion of Securities are issuable under the
Indenture) sold pursuant to any Shelf Registration Statement free of any
restrictive legends and, with respect of any Securities, in such denominations
permitted by the Indenture and registered in such names as Holders may request
at least two Business Days prior

10

 

to settlement of sales of Transfer Restricted Securities pursuant to such
Shelf Registration Statement.

          (i) Subject to the exceptions contained in (A) and (B) of Section 3(g)
above, the Company shall use its best efforts to cause the Transfer Restricted
Securities covered by the applicable Shelf Registration Statement to be
registered with or approved by such other federal, state and local governmental
agencies or authorities, and self-regulatory organizations in the United States
as may be necessary to enable the Notice Holders to consummate the disposition
of such Transfer Restricted Securities as contemplated by the Shelf
Registration Statement; without limitation to the foregoing, the Company shall
provide all such information as may be required by the National Association of
Securities Dealers, Inc. (the “NASD”) in connection with the offering under the
Shelf Registration Statement of the Transfer Restricted Securities (including,
without limitation, such as may be required by NASD Rule 2710 or 2720), and
shall cooperate with each Holder in connection with any filings required to be
made with the NASD by such Holder in that regard.

          (j) Upon the occurrence of any event described in Section 3(c)(v) or
3(c)(vi) hereof, the Company shall promptly prepare and file with the SEC a
post-effective amendment to any Shelf Registration Statement, or an amendment
or supplement to the related Prospectus, or any document incorporated therein
by reference, or file a document which is incorporated or deemed to be
incorporated by reference in such Shelf Registration Statement or Prospectus,
as the case may be, so that, as thereafter delivered to purchasers of the
Transfer Restricted Securities included therein, the Shelf Registration
Statement and the Prospectus, in each case as then amended or supplemented,
will not include an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading and, in the case of a
post-effective amendment, use its best efforts to cause it to become effective
as promptly as practicable; provided that the Company’s obligations under this
paragraph (j) shall be suspended if the Company has suspended the use of the
Prospectus in accordance with Section 2(d) hereof and given notice of such
suspension to Notice Holders, it being understood that the Company’s
obligations under this Section 3(j) shall be automatically reinstated at the
end of such Suspension Period.

          (k) The Company shall provide, prior to the effective date of any Shelf
Registration Statement hereunder (i) a CUSIP number for the Transfer Restricted
Securities registered under such Shelf Registration Statement and (ii) global
certificates for such Transfer Restricted Securities to the Trustee, in a form
eligible for deposit with DTC.

          (l) The Company shall make generally available to its security holders an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 promulgated by the SEC thereunder (or any similar rule
promulgated under the Securities Act) for a 12-month period commencing on the
first day of the first fiscal quarter of the Company commencing after the
effective date of any Shelf Registration Statement or each post-effective
amendment to any Shelf Registration Statement, which such statements shall be
made available no later than 45 days after the end of the 12-month period or 90
days after the end of the 12-month period, if the 12-month period coincides
with the fiscal year of the Company.

11

 

          (m) The Company shall use its best efforts to cause the Indenture to be
qualified under the Trust Indenture Act (as defined in the Indenture) not later
than the effective date of the first Shelf Registration Statement.

          (n) The Company shall cause all shares of Common Stock issuable upon
conversion of the Securities to be approved for listing upon official notice of
issuance on each securities exchange or quotation system on which the Common
Stock is then listed no later than the date the applicable Shelf Registration
Statement is declared effective and, in connection therewith, to make such
filings as may be required under the Exchange Act and to have such filings
declared effective as and when required thereunder.

          (o) The Company may require each Holder of Transfer Restricted Securities
to be sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of such
Transfer Restricted Securities sought by the Notice and Questionnaire and such
additional information as may, from time to time, be required by the Securities
Act and/or the SEC or any other federal or state governmental authority, and
the obligations of the Company to any Holder under this Agreement shall be
expressly conditioned on the compliance of such Holder with such request.

          (p) The Company shall, if reasonably requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement (i) such information as the Majority Holders provide and (ii) such
information as a Notice Holder may provide from time to time to the Company in
writing for inclusion in a Prospectus or any Shelf Registration Statement
concerning such Notice Holder and the distribution of such Holder’s Transfer
Restricted Securities and, in either case, shall make all required filings of
such Prospectus supplement or post-effective amendment promptly after being
notified in writing of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided that the Company shall not be
required to take any action under this Section 3(p) that is not, in the
reasonable opinion of counsel for the Company, in compliance with applicable
law.

          (q) In the case of the underwritten offering provided by Section 7 below,
take all actions necessary, or reasonably requested by the holders of a
majority of the Transfer Restricted Securities being sold in such underwritten
offering, in order to expedite or facilitate disposition of such Transfer
Restricted Securities; provided that the Company shall not be required to take
any action in connection with the underwritten offering without its consent.

          (r) If reasonably requested in writing in connection with any disposition
of Transfer Restricted Securities pursuant to a Shelf Registration Statement,
make reasonably available for inspection during normal business hours by a
representative for the Notice Holders of such Transfer Restricted Securities
and any broker-dealers, attorneys and accountants retained by such Notice
Holders, all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
appropriate executive officers, directors and designated employees of the
Company and its subsidiaries to make reasonably available for inspection during
normal business hours all relevant information reasonably requested by such
representative for the Notice Holders or any such broker-dealers, attorneys or
accountants in connection with such disposition, in each case as is customary
for similar “due diligence” examinations; provided, however, that any
information that is designated by the

12

 

Company, in good faith, as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless disclosure
thereof is made in connection with a court, administrative or regulatory
proceeding or required by law, or such information has become available to the
public generally through the Company or through a third party without an
accompanying obligation of confidentiality.

          (s) Each Notice Holder agrees that, upon receipt of notice of the
happening of an event described in Sections 3(c)(ii) through and including
3(c)(vii), each Holder shall forthwith discontinue (and shall cause its agents
and representatives to discontinue) disposition of Transfer Restricted
Securities and will not resume disposition of Transfer Restricted Securities
until such Holder has received copies of an amended or supplemented Prospectus
contemplated by Section 3(j) hereof, or until such Holder is advised in writing
by the Company that the use of the Prospectus may be resumed or that the
relevant Suspension Period has been terminated, as the case may be, provided
that the foregoing shall not prevent the sale, transfer or other disposition of
Transfer Restricted Securities by a Notice Holder in a transaction which is
exempt from, or not subject to, the registration requirements of the Securities
Act, so long as such Notice Holder does not and is not required to deliver the
applicable Prospectus or Shelf Registration Statement in connection with such
sale, transfer or other disposition, as the case may be; and provided, further,
that the provisions of this Section 3(s) shall not prevent the occurrence of a
Registration Default or otherwise limit the obligation of the Company to pay
Additional Amounts.

          (t) Each Notice Holder shall promptly notify the Company of any
inaccuracies or changes in the information provided in such Notice Holder’s
Notice and Questionnaire that may occur subsequent to the date thereof at any
time while the Shelf Registration Statement remains effective.

          (u) The Company will register shares of Common Stock issuable upon
conversion of the Securities to the extent necessary to permit such shares of
Common Stock to be freely tradable under the Securities Act by persons who are
not affiliates of the Company.

          4. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 2 and 3 hereof. Such fees and expenses shall include, without
limitation: (i) all registration and filing fees and expenses (including
filings made with the NASD); (ii) all fees and expenses of compliance with
federal securities and state Blue Sky or securities laws; (iii) all expenses of
printing (including printing of Prospectuses and certificates for the Common
Stock to be issued upon conversion of the Securities) and the Company’s
expenses for messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel to the Company; (v) all application and filing fees in
connection with listing (or authorizing for quotation) the Common Stock on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company. The Company shall bear its
internal expenses (including, without limitation, all salaries and expenses of
their officers and employees performing legal, accounting or other duties), the
expenses of any annual audit and the fees and expenses of any Person, including
special experts, retained by the Company. Notwithstanding the provisions of
this Section 4, each Holder shall bear its own legal fees and expenses and the
expense of any broker’s commission, agency fee and underwriter’s

13

 

 discount or commission
(including, without limitation, the expenses related to the engagement of a
“qualified independent underwriter”), if any, relating to the sale or
disposition of such Holder’s Transfer Restricted Securities pursuant to a Shelf
Registration Statement.

          5. Indemnity and Contribution.

          (a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless each Holder of Transfer Restricted Securities named
in any Shelf Registration Statement (including, without limitation, each
Initial Purchaser), its directors, its officers and each person, if any, who
controls any such Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively referred to for
purposes of this Section 5 as a “Holder”), from and against any and all losses,
claims, damages and liabilities (including without limitation the legal fees
and other expenses incurred in connection with any suit, action or proceeding
or any claim asserted) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Shelf Registration Statement, or
in any Prospectus, or any amendment thereof or supplement thereto, or caused by
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Holder
furnished to the Company in writing by such Holder expressly for use therein;
provided that the foregoing indemnity with respect to any Shelf Registration
Statement, or any Prospectus, or any amendment or supplement thereto, shall not
inure to the benefit of any Holder (or the benefit of any person controlling
such Holder) from whom the person asserting any such losses, claims, damages or
liabilities purchased the securities concerned, to the extent that any such
loss, claim, damage or liability of the Holders occurs under the circumstance
where it shall have been established that (w) the Company had previously
furnished copies of the Prospectus, and any amendments and supplements thereto,
to the Holder, (x) delivery of the Prospectus, and any amendment or supplements
thereto, was required by the Securities Act to be made to such person, (y) the
untrue statement or omission of a material fact was corrected in the Prospectus
or amendments or supplements thereto, and (z) there was not sent or given to
such person, at or prior to the written confirmation of the sale of such
securities to such person, a copy of such Prospectus or amendments or
supplements thereto.

          (b) Each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company and the Guarantors, its directors, its officers and each
person who controls the Company and the Guarantors within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company and the Guarantors to
the Holders, but only with reference to information relating to such Holder
furnished to the Company and the Guarantors in writing by such Holder expressly
for use in the Shelf Registration Statement, or in any Prospectus, or any
amendment or supplement thereto.

          (c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of
the two preceding paragraphs, such person (the “Indemnified Person”) shall
promptly notify the person against whom such indemnity may

14

 

be sought (the “Indemnifying Person”) in writing, and the
Indemnifying Person, upon request of the Indemnified Person, shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may designate in such
proceeding and shall pay the reasonable fees and expenses of such counsel
related to such proceeding. The Indemnifying Person shall be relieved from
liability to the extent that the Indemnified Person fails to promptly notify
the Indemnifying Person of any action commenced against it in respect of which
indemnity may be sought hereunder; provided that failure to so notify the
Indemnifying Person (i) shall not relieve the Indemnifying Person from any
liability hereunder to the extent it is not materially prejudiced as a result
thereof and (ii) in any event shall not relieve the Indemnifying Person from
any liability which it may have otherwise than on account of this indemnity
agreement. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless (i) the Indemnifying Person
and the Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate, in the reasonable judgment
of the Indemnified Person, due to actual or potential differing interests
between them. It is understood that the Indemnifying Person shall not, in
connection with any proceeding or related proceeding in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed as they are incurred. Any such separate firm for
the Holders and such control persons of the Holders shall be designated in
writing by the Representative and any such separate firm for the Company and
the Guarantors, their respective directors, officers and such control persons
of the Company and the Guarantors shall be designated in writing by the Company
and the Guarantors. The Indemnifying Person shall not be liable for any
settlement of any pending or threatened proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
Indemnified Person shall have requested an Indemnifying Person to reimburse the
Indemnified Person for fees and expenses of counsel as contemplated by the
fourth sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding on terms reasonably satisfactory
to such Indemnified Person.

          (d) If the indemnification provided for in paragraph (a) or (b) of this
Section 5 is unavailable to an Indemnified Person or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraph, in lieu of

15

 

indemnifying such Indemnified Person thereunder,
shall contribute to the amount paid or payable by such Indemnified Person as a
result of such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Guarantors on the one hand and the Holder on the other hand with respect to the
sale by such Holder of Securities or Common Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Guarantors on the one hand and of such Holder on the other in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. Benefits
received by the Company and the Guarantors shall be deemed to be equal to the
total net proceeds from the Initial Placement (before deducting expenses).
Benefits received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions as set forth in the Offering
Memorandum, and benefits received by any other Holders shall be deemed to be
equal to the value of receiving Securities registered under the Securities Act.
Benefits received by any underwriter shall be deemed to be equal to the total
underwriting discounts and commissions, as set forth on the cover page of the
Prospectus forming a part of the Shelf Registration Statement which resulted in
such losses, claims, damages or liabilities. The relative fault of the Company
and the Guarantors on the one hand and such Holder on the other shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or
either of the Guarantors or by such Holder and the parties’ relevant intent,
knowledge, information and opportunity to correct or prevent such statement or
omission.

          (e) The Company, the Guarantors and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 5 were determined
by pro rata allocation (even if the Company and the Guarantors, on the one
hand, or the Holders, on the other hand, were treated as one entity for such
purpose) or any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) of this Section 5. The
amount paid or payable by an Indemnified Person as a result of losses, claims,
damages and liabilities referred to in paragraph (d) of this Section 5 shall be
deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses incurred by such Indemnified Person not otherwise
reimbursed in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 5, in no event shall any
Holder be required to contribute any amount in excess of the amount by which
the total amount received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Shelf Registration Statement exceeds the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

          (f) The remedies provided for in this Section 5 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
Indemnified Party at law or in equity.

16

 

          (g) The indemnity and contribution agreements contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Holder or any person controlling any Holder or by or on behalf of the
Company and the Guarantors, their respective officers or directors or any other
person controlling the Company or either of the Guarantors and (iii) the sale
by a Holder of Transfer Restricted Securities covered by a Shelf Registration
Statement.

          6. Rules 144 and 144A. The Company covenants that it shall use its
best efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner so long as the Transfer
Restricted Securities remain outstanding. If at any time the Company is not
required to file such reports, it will, upon request of any Holder or
beneficial owner of Transfer Restricted Securities, make available such
information necessary to permit sales pursuant to Rule 144A. The Company
further covenants that, for as long as any Transfer Restricted Securities
remain outstanding, it will take such further action as any Holder of Transfer
Restricted Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Transfer Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 and Rule 144A. Upon the written request of any
Holder of Transfer Restricted Securities, the Company shall deliver to such
Holder a written statement as to whether it has complied with such
requirements.

          7. Underwritten Offering.

          (a) If any of the Transfer Restricted Securities or other securities
covered by any Shelf Registration Statement are proposed to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the underwritten offering will be selected,
subject to the rights of the Company’s common stockholders party to the August
2002 Registration Agreement to the extent exercised by them, by the Majority
Holders included in such underwritten offering, subject to the consent of the
Company (which shall not be unreasonably withheld or delayed), and such Holders
shall be responsible for all underwriting commissions and discounts in
connection therewith and all of the fees and expenses set forth in Section 4
hereof, including, without limitation, the Company’s reasonable and documented
internal expenses as described therein; provided, however, that if any common
stockholders party to the August 2002 Registration Agreement exercise their
“piggyback” rights under the August 2002 Registration Agreement, such common
stockholders will be responsible for their portion of the underwriting
commissions and discounts and other fees and expenses as set forth in the
August 2002 Registration Agreement, and any Holder hereunder or any holder
pursuant to any Parity Agreement will be responsible only for its pro rata
share (taking into account the participation of any common stockholders party
to the August 2002 Registration Agreement) of the Company’s reasonable and
documented internal expenses; provided further, that notwithstanding anything
contained in this Agreement to the contrary, the Company shall be under no
obligation to participate in any underwritten offering with respect to the
Transfer Restricted Securities or any other securities and no underwritten
offering shall be effected pursuant to this Agreement without the prior consent
of the Company; and provided further that, if and to the extent the Company may
consent to an underwritten offering of the Company’s common stock in accordance
with this Section 7(a), the rights of the Holders or any holders pursuant to
any Parity Agreement to have their Transfer Restricted Securities or other

17

 

securities included in such underwritten offering will be subject to the
cut-back and other provisions of the August 2002 Registration Agreement.

          (b) No Holder may participate in any underwritten offering hereunder
unless such person (i) agrees to sell such Holder’s Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the Holders entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.

          8. Miscellaneous.

          (a) No Inconsistent Agreements. Except with respect to the August
2002 Registration Agreement and the March 2004 Registration Agreement, none of
the Company or the Guarantors has, as of the date hereof, entered into nor
shall any of them, on or after the date hereof, enter into, any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders herein or otherwise conflicts with the provisions hereof. For
avoidance of doubt, delivery by the Company or the Guarantors of any subsequent
agreement (a “Parity Agreement”) providing the parties benefited thereby with
any resale registration rights ranking on par with those provided herein, and
subordinate to the rights of parties to the August 2002 Registration Agreement
shall not be deemed to be inconsistent with the rights granted to the Holders
herein or in conflict with the provisions hereof. In addition, except pursuant
to a Parity Agreement, none of the Company or the Guarantors shall grant to any
of its securityholders the right to include any of its securities in the Shelf
Registration Statement provided for in this Agreement other than the Transfer
Restricted Securities and other than the “registrable securities"(as defined in
the August 2002 Registration Agreement”) held by parties to the August 2002
Registration Agreement, it being expressly understood and acknowledged that the
rights of such parties to the August 2002 Registration Agreement take
precedence over those of the Holders hereunder and the holders under any Parity
Agreement.

          (b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company and the Guarantors have
obtained the written consent of at least the majority of the Holders of the
then outstanding Transfer Restricted Securities; provided that with respect to
any matter that directly or indirectly affects the rights of the Initial
Purchasers hereunder, the Company and the Guarantors shall obtain the written
consent of the Initial Purchasers against which such amendment, qualification,
supplement, waiver or consent is to be effective. Notwithstanding the
foregoing (except the foregoing proviso), a waiver or consent to departure from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose Transfer Restricted Securities are being sold pursuant
to a Shelf Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by the Majority Holders.

          (c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier, or air courier guaranteeing overnight delivery:

18

 

               (i) if to the Initial Purchasers, initially at their address set
forth in the Purchase Agreement;

               (ii) if to any other Holder, at the most current address of such
Holder maintained by the Registrar under the Indenture or the registrar
of the Common Stock (provided that while the Securities or the Common
Stock are in book-entry form, notice to the Trustee or transfer and
paying agent, as the case may be, shall serve as notice to the Holders),
or, in the case of the Notice Holder, the address set forth in its Notice
and Questionnaire; and

               (iii) if to the Company and the Guarantors, to:

	 	 	 
	

	 	CapitalSource Inc.
	

	 	4445 Willard Avenue
	

	 	12th Floor
	

	 	Chevy Chase, MD 20815
	

	 	Facsimile: (301) 841-2380
	

	 	Attn: Chief Legal Officer
	 
	 	 
	

	 	With a copy to:
	 
	 	 
	

	 	Hogan & Hartson L.L.P.
	

	 	555 Thirteenth Street, NW
	

	 	Washington, DC 20004-1109
	

	 	Facsimile: (202) 637-5910
	

	 	Attn: James E. Showen

     All such notices and communications shall be deemed to have been duly
given when received, if delivered by hand or air courier, and when sent, if
sent by first-class mail or telecopier.

     The Initial Purchasers or the Company and the Guarantors by notice to the
other may designate additional or different addresses for subsequent notices or
communications.

          (d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent
by the Company or the Guarantors thereto, subsequent Holders. The Company and
the Guarantors hereby agree to extend the benefits of this Agreement to any
Holder and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto. In the event that any other person
shall succeed to the Company or the Guarantors under the Indenture, then such
successor shall enter into an agreement, in form and substance reasonably
satisfactory to the Initial Purchasers, whereby such successor shall assume all
of the Company’s or such Guarantor’s obligations, as the case may be, under
this Agreement.

          (e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed

19

 

 shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.

          (f) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

          (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.

          (h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.

          (i) Securities Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
or the shares of Common Stock issuable upon conversion thereof is required
hereunder, Securities or the shares of Common Stock issued upon conversion
thereof held by the Company or its Affiliates (other than subsequent Holders of
Securities or the Common Stock issued upon conversion thereof if such
subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.

          (j) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Shelf Registration Period, except
for (i) any liabilities or obligations under Section 2(e) and related
liabilities or obligations under Sections 4 and 5, to the extent arising prior
to the end of the Shelf Registration Period, and (ii) the obligations under
Section 3(u) and the related liabilities or obligations under Sections 4 and 5,
which shall survive until all interests in the Securities have been redeemed,
repurchased, converted, cancelled or exchanged for Common Stock.

20

 

     Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Guarantors and you.

	 	 	 	 	 
	 	Very truly yours,

CAPITALSOURCE INC.

 	 
	 	By:  	/s/ Steven A. Museles
 	 
	 	 	Name:  	Steven A. Museles 	 
	 	 	Title:  	Senior Vice President 	 
	 

	 	 	 	 	 
	 	CAPITALSOURCE HOLDINGS LLC

 	 
	 	By:  	/s/ Steven A. Museles
 	 
	 	 	Name:  	Steven A. Museles 	 
	 	 	Title:  	Senior Vice President 	 
	 

	 	 	 	 	 
	 	CAPITALSOURCE FINANCE LLC

 	 
	 	By:  	/s/ Steven A. Museles
 	 
	 	 	Name:  	Steven A. Museles 	 
	 	 	Title:  	Senior Vice President 	 
	 

The foregoing Agreement is hereby confirmed

and accepted as of the date first above written.

CITIGROUP GLOBAL MARKETS INC.

Acting on behalf of itself and as Representative

of the Initial Purchasers

	 	 	 
	By:

	 	/s/ Peter Kapp
	

	 	

	

	 	Name: Peter Kapp
	

	 	Title: Vice President

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