Document:

exv4w8

 

Exhibit 4.8

BRIGHAM EXPLORATION COMPANY

ISSUER

AND

__________________________________________

TRUSTEE

________________

INDENTURE

DATED AS OF _______, 20__

________________

SUBORDINATED DEBT SECURITIES

(Issuable in Series)

 

 

BRIGHAM EXPLORATION COMPANY

RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939

AND INDENTURE, DATED AS OF ________, 20__

	 	 	 
	Section of	 	 
	Trust Indenture	 	Section(s) of
	Act of 1939
	 	Indenture

	§ 310 (a)(1)
	 	6.09
	(a)(2)
	 	6.09
	(a)(3)
	 	Not Applicable
	(a)(4)
	 	Not Applicable
	(b)
	 	6.08, 6.10
	§ 311 (a)
	 	6.13
	(b)
	 	6.13
	(c)
	 	Not Applicable
	§ 312 (a)
	 	7.01, 7.02(a)
	(b)
	 	7.02(b)
	(c)
	 	7.02(b)
	§ 313 (a)
	 	7.03(a)
	(b)
	 	7.03(a)
	(c)
	 	7.03(a)
	(d)
	 	7.03(b)
	§ 314 (a)
	 	7.04, 10.05
	(b)
	 	Not Applicable
	(c)(1)
	 	1.03
	(c)(2)
	 	1.03
	(c)(3)
	 	Not Applicable
	(d)
	 	Not Applicable
	(e)
	 	1.03
	§ 315 (a)
	 	6.01(a)
	(b)
	 	6.02
	(c)
	 	6.01(b)
	(d)
	 	6.01(c)
	(d)(1)
	 	6.01(a)(1)
	(d)(2)
	 	6.01(c)(2)
	(d)(3)
	 	6.01(c)(3)
	(e)
	 	5.14

 

 

	 	 	 
	Section of	 	 
	Trust Indenture	 	Section(s) of
	Act of 1939
	 	Indenture

	§ 316 (a)(1)(A)
	 	5.02, 5.12
	(a)(1)(B)
	 	5.13
	(a)(2)
	 	Not Applicable
	(a) last sentence
	 	1.01
	(b)
	 	5.08
	§ 317 (a)(1)
	 	5.03
	(a)(2)
	 	5.04
	(b)
	 	10.03
	§ 318 (a)
	 	1.08

	 	 	Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.

 

 

TABLE OF CONTENTS1

	 	 	 	 	 
	RECITALS OF THE COMPANY
	 	 	1	 
	ARTICLE ONE
	 	 	1	 
	DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
	 	 	1	 
	Section 1.01. Definitions
	 	 	1	 
	Act
	 	 	1	 
	Additional Amounts
	 	 	1	 
	Affiliate
	 	 	2	 
	Agent Members
	 	 	2	 
	Authenticating Agent
	 	 	2	 
	Authorized Newspaper
	 	 	2	 
	Board of Directors
	 	 	2	 
	Board Resolution
	 	 	2	 
	Business Day
	 	 	2	 
	Commission
	 	 	2	 
	Company
	 	 	2	 
	Company Request
	 	 	2	 
	Company Order
	 	 	2	 
	Conversion Event
	 	 	2	 
	Corporate Trust Office
	 	 	2	 
	Debt
	 	 	2	 
	Default
	 	 	2	 
	Defaulted Interest
	 	 	3	 
	Dollar
	 	 	3	 
	Event of Default
	 	 	3	 
	Exchange Rate
	 	 	3	 
	Global Security
	 	 	3	 
	Holder
	 	 	3	 
	Indenture
	 	 	3	 
	Interest
	 	 	3	 
	Interest Payment Date
	 	 	3	 
	Judgment Currency
	 	 	3	 
	Maturity
	 	 	3	 
	Mortgage
	 	 	3	 
	Officers’ Certificate
	 	 	3	 
	Opinion of Counsel
	 	 	3	 
	Original Issue Discount Security
	 	 	3	 
	Outstanding
	 	 	4	 
	Paying Agent
	 	 	4	 
	Person
	 	 	4	 
	Place of Payment
	 	 	4	 
	Predecessor Security
	 	 	4	 
	Principal Property
	 	 	4	 
	Redemption Date
	 	 	5	 
	Redemption Price
	 	 	5	 
	Regular Record Date
	 	 	5	 
	Required Currency
	 	 	5	 
	Responsible Officer
	 	 	5	 
	Securities
	 	 	5	 
	Security Custodian
	 	 	5	 
	Security Register
	 	 	5	 
	Senior Indebtedness
	 	 	5	 

	1 	 	Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.

i

 

	 	 	 	 	 
	Special Record Date
	 	 	5	 
	Stated Maturity
	 	 	5	 
	Stockholders’ Equity
	 	 	5	 
	Subsidiary
	 	 	5	 
	Trust Indenture Act
	 	 	6	 
	Trustee
	 	 	6	 
	United States
	 	 	6	 
	United States Alien
	 	 	6	 
	U.S. Government Obligations
	 	 	6	 
	Vice President
	 	 	6	 
	Yield to Maturity
	 	 	6	 
	Section 1.02. Incorporation by Reference of Trust Indenture Act
	 	 	6	 
	Section 1.03. Compliance Certificates and Opinions
	 	 	6	 
	Section 1.04. Form of Documents Delivered to Trustee
	 	 	7	 
	Section 1.05. Acts of Holders; Record Dates
	 	 	7	 
	Section 1.06. Notices, Etc., to Trustee and Company
	 	 	8	 
	Section 1.07. Notice to Holders; Waiver
	 	 	9	 
	Section 1.08. Conflict With Trust Indenture Act
	 	 	9	 
	Section 1.09. Effect of Headings and Table of Contents
	 	 	9	 
	Section 1.10. Successors and Assigns
	 	 	9	 
	Section 1.11. Separability Clause
	 	 	9	 
	Section 1.12. Benefits of Indenture
	 	 	9	 
	Section 1.13. Governing Law
	 	 	9	 
	Section 1.14. Legal Holidays
	 	 	10	 
	Section 1.15. Corporate Obligation
	 	 	10	 
	ARTICLE TWO
	 	 	10	 
	SECURITY FORMS
	 	 	10	 
	Section 2.01. Forms Generally
	 	 	10	 
	Section 2.02. Form of Trustee’s Certificate of Authentication
	 	 	10	 
	Section 2.03. Securities Issuable in the Form of a Global Security
	 	 	11	 
	ARTICLE THREE
	 	 	12	 
	THE SECURITIES
	 	 	12	 
	Section 3.01. Amount Unlimited; Issuable in Series
	 	 	12	 
	Section 3.02. Denominations
	 	 	14	 
	Section 3.03. Execution, Authentication, Delivery and Dating
	 	 	15	 
	Section 3.04. Temporary Securities
	 	 	16	 
	Section 3.05. Registration, Registration of Transfer and Exchange
	 	 	16	 
	Section 3.06. Mutilated, Destroyed, Lost and Stolen Securities
	 	 	17	 
	Section 3.07. Payment of Interest; Interest Rights Preserved
	 	 	18	 
	Section 3.08. Persons Deemed Owners
	 	 	18	 
	Section 3.09. Cancellation
	 	 	19	 
	Section 3.10. Computation of Interest
	 	 	19	 
	Section 3.11. CUSIP Numbers
	 	 	19	 
	ARTICLE FOUR
	 	 	19	 
	SATISFACTION AND DISCHARGE
	 	 	19	 
	Section 4.01. Satisfaction and Discharge of Indenture
	 	 	19	 
	Section 4.02. Application of Trust Money
	 	 	20	 
	Section 4.03. Discharge of Liability on Securities of Any Series
	 	 	21	 
	Section 4.04. Reinstatement
	 	 	21	 
	ARTICLE FIVE
	 	 	22	 
	REMEDIES
	 	 	22	 
	Section 5.01. Events of Default
	 	 	22	 
	Section 5.02. Acceleration of Maturity; Rescission and Annulment
	 	 	23	 
	Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee
	 	 	24	 
	Section 5.04. Trustee May File Proofs of Claim
	 	 	24	 
	Section 5.05. Trustee May Enforce Claims Without Possession of Securities or Coupons
	 	 	25	 

ii

 

	 	 	 	 	 
	Section 5.06. Application of Money Collected
	 	 	25	 
	Section 5.07. Limitation on Suits
	 	 	26	 
	Section 5.08. Unconditional Right of Holders to Receive Principal, Premium and Interest
	 	 	26	 
	Section 5.09. Restoration of Rights and Remedies
	 	 	26	 
	Section 5.10. Rights and Remedies Cumulative
	 	 	27	 
	Section 5.11. Delay or Omission Not Waiver
	 	 	27	 
	Section 5.12. Control by Holders
	 	 	27	 
	Section 5.13. Waiver of Past Defaults
	 	 	27	 
	Section 5.14. Undertaking for Costs
	 	 	28	 
	Section 5.15. Waiver of Stay or Extension Laws
	 	 	28	 
	ARTICLE SIX
	 	 	28	 
	THE TRUSTEE
	 	 	28	 
	Section 6.01. Certain Duties and Responsibilities
	 	 	28	 
	Section 6.02. Notice of Defaults
	 	 	29	 
	Section 6.03. Certain Rights of Trustee
	 	 	29	 
	Section 6.04. Not Responsible for Recitals or Issuance of Securities
	 	 	30	 
	Section 6.05. May Hold Securities
	 	 	30	 
	Section 6.06. Money Held in Trust
	 	 	30	 
	Section 6.07. Compensation and Reimbursement
	 	 	30	 
	Section 6.08. Disqualification; Conflicting Interests
	 	 	31	 
	Section 6.09. Corporate Trustee Required; Eligibility
	 	 	31	 
	Section 6.10. Resignation and Removal; Appointment of Successor
	 	 	32	 
	Section 6.11. Acceptance of Appointment by Successor
	 	 	33	 
	Section 6.12. Merger, Conversion, Consolidation or Succession to Business
	 	 	33	 
	Section 6.13. Preferential Collection of Claims Against Company
	 	 	33	 
	Section 6.14. Appointment of Authenticating Agent
	 	 	34	 
	ARTICLE SEVEN
	 	 	35	 
	HOLDER’S LISTS AND REPORTS BY TRUSTEE AND COMPANY
	 	 	35	 
	Section 7.01. Company to Furnish Trustee Names and Addresses of Holders
	 	 	35	 
	Section 7.02. Preservation of Information; Communications to Holders
	 	 	35	 
	Section 7.03. Reports by Trustee
	 	 	35	 
	Section 7.04. Reports by Company
	 	 	36	 
	ARTICLE EIGHT
	 	 	36	 
	CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
	 	 	36	 
	Section 8.01. Company May Consolidate, Etc., Only on Certain Terms
	 	 	36	 
	Section 8.02. Successor Person Substituted
	 	 	36	 
	ARTICLE NINE
	 	 	37	 
	SUPPLEMENTAL INDENTURES
	 	 	37	 
	Section 9.01. Supplemental Indentures Without Consent of Holders
	 	 	37	 
	Section 9.02. Supplemental Indentures With Consent of Holders
	 	 	38	 
	Section 9.03. Execution of Supplemental Indentures
	 	 	38	 
	Section 9.04. Effect of Supplemental Indentures
	 	 	39	 
	Section 9.05. Conformity With Trust Indenture Act
	 	 	39	 
	Section 9.06. Reference in Securities to Supplemental Indentures
	 	 	39	 
	ARTICLE TEN
	 	 	39	 
	COVENANTS
	 	 	39	 
	Section 10.01. Payment of Principal, Premium and Interest
	 	 	39	 
	Section 10.02. Maintenance of Office or Agency
	 	 	39	 
	Section 10.03. Money for Securities Payments to be Held in Trust
	 	 	40	 
	Section 10.04. Existence
	 	 	41	 
	Section 10.05. Statement by Officers as to Default
	 	 	41	 
	Section 10.06. Waiver of Certain Covenants
	 	 	41	 
	Section 10.07. Additional Amounts
	 	 	41	 
	ARTICLE ELEVEN
	 	 	42	 
	REDEMPTION OF SECURITIES
	 	 	42	 
	Section 11.01. Applicability of Article
	 	 	42	 

iii

 

	 	 	 	 	 
	Section 11.02. Election to Redeem; Notice to Trustee
	 	 	42	 
	Section 11.03. Selection by Trustee of Securities to be Redeemed
	 	 	42	 
	Section 11.04. Notice of Redemption
	 	 	42	 
	Section 11.05. Deposit of Redemption Price
	 	 	43	 
	Section 11.06. Securities Payable on Redemption Date
	 	 	43	 
	Section 11.07. Securities Redeemed in Part
	 	 	43	 
	ARTICLE TWELVE
	 	 	44	 
	SINKING FUNDS
	 	 	44	 
	Section 12.01. Applicability of Article
	 	 	44	 
	Section 12.02. Satisfaction of Sinking Fund Payments with Securities
	 	 	44	 
	Section 12.03. Redemption of Securities for Sinking Fund
	 	 	44	 
	ARTICLE THIRTEEN
	 	 	45	 
	SUBORDINATION
	 	 	45	 
	Section 13.01. Securities Subordinated to Senior Indebtedness.
	 	 	45	 
	Section 13.02. Right of Trustee to Hold Senior Indebtedness.
	 	 	45	 
	Section 13.03. Subordination Not to Prevent Events of Default.
	 	 	45	 
	Section 13.04. No Fiduciary Duty of Trustee to Holders of Senior Indebtedness.
	 	 	45	 
	Section 13.05. Article Applicable to Paying Agent.
	 	 	45	 
	ARTICLE FOURTEEN
	 	 	45	 
	MEETINGS OF HOLDERS OF SECURITIES
	 	 	45	 
	Section 14.01. Purposes for Which Meetings May Be Called
	 	 	46	 
	Section 14.02. Call, Notice and Place of Meetings
	 	 	46	 
	Section 14.03. Persons Entitled to Vote at Meetings
	 	 	46	 
	Section 14.04. Quorum; Action
	 	 	46	 
	Section 14.05. Determination of Voting Rights; Conduct and Adjournment of Meetings
	 	 	47	 
	Section 14.06. Counting Votes and Recording Action of Meetings
	 	 	47	 

iv

 

     INDENTURE, dated as of                                       20                   between BRIGHAM EXPLORATION COMPANY,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the “Company”), having its principal office at 6300
Bridge Point Parkway, Building Two, Suite 500, Austin, Texas 78730, and
                                                                            , [a national banking association duly
organized and existing under the laws of the United States of America], as
Trustee (herein called the “Trustee”), the office of the Trustee at which at
the date hereof its corporate trust business is principally administered being
                                                                            , Attention:
                                                                            .

RECITALS OF THE COMPANY

     The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein
called the “Securities”), to be issued in one or more series as provided in
this Indenture.

     This Indenture is subject to the provisions of the Trust Indenture Act and
the rules and regulations of the Commission promulgated thereunder that are
required to be part of this Indenture and, to the extent applicable, shall be
governed by such provisions.

     All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities or of
series thereof, as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS

OF GENERAL APPLICATION.

     Section 1.01. Definitions.

     For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:

	 	(1)	 	the terms defined in this Article One have the meanings
assigned to them in this Article One and include the plural as well
as the singular;
	 
	 	(2)	 	all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States, and, except as otherwise
herein expressly provided, the term “generally accepted accounting
principles” with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally
accepted in the United States at the date of such computation; and
	 
	 	(3)	 	the words “herein,” “hereof” and “hereunder” and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.

     Certain terms, used principally in Article Six, are defined in Section
1.02.

     “Act,” when used with respect to any Holder, has the meaning specified in
Section 1.05.

     “Additional Amounts” means any additional amounts that are required by the
express terms of a Security or by or pursuant to a Board Resolution, under
circumstances specified therein or pursuant thereto, to be paid by the

1

 

Company with respect to certain taxes, assessments or other governmental charges
imposed on certain Holders and that are owing to such Holders.

     “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 the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.

     “Agent Members” has the meaning specified in Section 2.03.

     “Authenticating Agent” means any Person, which may include the Company,
authorized by the Trustee to act on behalf of the Trustee pursuant to Section
6.14 to authenticate Securities of one or more series.

     “Authorized Newspaper” means a newspaper of general circulation in the New
York, New York area, printed in the English language and customarily published
on each Business Day, whether or not published on Saturdays, Sundays or
holidays. Whenever successive weekly publications in an Authorized Newspaper
are required hereunder they may be made (unless otherwise expressly provided
herein) on the same or different days of the week and in the same or in
different Authorized Newspapers.

     “Board of Directors” means either the board of directors of the Company or
any duly authorized committee of that board.

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

     “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in the Place of Payment or the
city in which the Corporate Trust Office is located are authorized or obligated
by law or executive order to close.

     “Commission” means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as
amended, 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.

     “Company” means the Person named as the “Company” in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter “Company” shall
mean such successor Person.

     “Company Request” and “Company Order” mean, respectively, a written
request or order signed in the name of the Company by its Chairman of the
Board, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Controller, an Assistant Controller, its Secretary or an
Assistant Secretary, and delivered to the Trustee.

     “Conversion Event” has the meaning specified in Section 5.01.

     “Corporate Trust Office” means the principal office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date hereof is that indicated in the
introductory paragraph of this Indenture.

     “Debt” means any indebtedness for money borrowed.

     “Default” means, with respect to the Securities of any series, any event,
act or condition that is, or after notice or the passage of time or both would
be, an Event of Default with respect to Securities of such series.

2

 

     “Defaulted Interest” has the meaning specified in Section 3.07.

     “Depositary” shall mean, with respect to Securities of any series, for
which the Company shall determine that such Securities will be issued as a
Global Security, The Depository Trust Company, New York, New York, another
clearing agency, or any successor registered as a clearing agency under the
Exchange Act or other applicable statute or regulation, which, in each case,
shall be designated by the Company pursuant to Section 2.03(b).

     “Dollar” or “$” means a dollar or other equivalent unit in such coin or
currency of the United States as at the time shall be legal tender for the
payment of public and private debts.

     “Event of Default” has the meaning specified in Section 5.01.

     “Exchange Rate” has the meaning specified in Section 3.02.

     “Global Security” shall mean, with respect to the Securities, a Security
executed by the Company and delivered by the Trustee to the Depositary or
pursuant to the Depositary’s instruction, all in accordance with this
Indenture, which shall be registered in the name of the Depositary or its
nominee.

     “Holder,” when used with respect to any Security, means the Person in
whose name the Security is registered in the Security Register.

     “Indenture” means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of particular series of Securities established as
contemplated by Section 3.01 and the provisions of the Trust Indenture Act that
are deemed to be a part of and govern this instrument.

     “Interest,” when used with respect to an Original Issue Discount Security
that by its terms bears interest only after Maturity, means interest payable
after Maturity.

     “Interest Payment Date,” when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.

     “Judgment Currency” has the meaning specified in Section 5.06.

     “Maturity,” when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.

     “Mortgage” means and includes any mortgage, pledge, lien, security
interest, conditional sale or other title retention agreement or other similar
encumbrance.

     “Officers’ Certificate “ means a certificate signed by the Chairman of the
Board, the President or a Vice President, and by the Treasurer, the Controller,
the Secretary or an Assistant Treasurer, Assistant Controller or Assistant
Secretary of the Company, and delivered to the Trustee, which certificate shall
be in compliance with Section 1.03 hereof.

     “Opinion of Counsel” means a written opinion of counsel, who may be
counsel for or an employee of the Company, rendered, if applicable, in
accordance with Section 314(c) of the Trust Indenture Act, which opinion shall
be in compliance with Section 1.03 hereof.

     “Original Issue Discount Security” means
any Security that provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.02.

3

 

     “Outstanding,” when used with respect to Securities of a series, means as
of the date of determination, all Securities of such series theretofore
authenticated and delivered under this Indenture, except:

	(1)	 	Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
	 
	(2)	 	Securities for whose payment or redemption money in the
necessary amount has been theretofore irrevocably deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall
act as its own Paying Agent) for the Holders of such Securities;
provided that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made; and
	 
	(3)	 	Securities that have been paid pursuant to Section 3.06 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, or whether a
quorum is present at a meeting of Holders of Securities, (a) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding for such purposes shall be the principal amount thereof that would
be due and payable as of the date of such determination upon acceleration of
the Maturity thereof pursuant to Section 5.02, (b) the principal amount of a
Security denominated in a foreign currency shall be the U.S. dollar equivalent,
determined by the Company on the date of original issuance of such Security, of
the principal amount (or, in the case of an Original Issue Discount Security,
the U.S. dollar equivalent, determined on the date of original issuance of such
Security, of the amount determined as provided in (a) above), of such Security
and (c) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver or upon any such
determination as to the presence of a quorum, only Securities which a
Responsible Officer of the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee’s right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.

     “Paying Agent” means any Person, which may include the Company, authorized
by the Company to pay the principal of, premium (if any) or interest on or any
Additional Amounts with respect to any one or more series of Securities on
behalf of the Company.

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

     “Place of Payment,” when used with respect to the Securities of any
series, means the place or places where the principal of, premium (if any) or
interest on or any Additional Amounts with respect to the Securities of such
series are payable as specified in accordance with Section 3.01 subject to the
provisions of Section 10.02.

     “Predecessor Security” of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the
purposes of this definition, any Security authenticated and delivered
under Section 3.06 in exchange for or in lieu of a mutilated, destroyed, lost
or stolen Security shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.

     “Principal Property” means any producing oil, gas or mineral property, or
any refining, smelting or manufacturing facility located in the United States,
other than: (1) property employed in transportation, distribution

4

 

or marketing;
(2) information and electronic data processing equipment; or (3) any property
that, in the opinion of the Board of Directors of the Company, is not
materially important to the total business conducted by the Company and its
Subsidiaries as an entirety.

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

     “Redemption Price,” when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to the terms of such
Security and this Indenture.

     “Regular Record Date” for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 3.01, or, if not so specified, the first day of the
calendar month of the month of such Interest Payment Date if such Interest
Payment Date is the fifteenth day of the calendar month or the fifteenth day of
the calendar month preceding such Interest Payment Date if such Interest
Payment Date is the first day of a calendar month, whether or not such day
shall be a Business Day.

     “Required Currency” has the meaning specified in Section 5.06.

     “Responsible Officer,” when used with respect to the Trustee, means any
officer of the Trustee with direct responsibility for the administration of
this Indenture and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.

     “Securities” has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.

     “Security Custodian” means, with respect to Securities of a series issued
in global form, the Trustee for Securities of such series, acting in its
capacity as custodian with respect to the Securities of such series, or any
successor entity thereto.

     “Security Register” and “Security Registrar” have the respective meanings
specified in Section 3.05.

     “Senior Indebtedness” of the Company, means with respect to the Securities
of a series as contemplated by Section 3.01, the indebtedness specified in such
Securities or in the supplemental indenture pursuant to which such Securities
are issued. Different series of Securities may be subordinated to different
Senior Indebtedness, and one series of Securities may be subordinated to
another series of Securities, all as and to the extent provided in the relevant
documentation for each issue of Securities.

     “Special Record Date” for the payment of any Defaulted Interest on the
Securities of any series means a date fixed by the Trustee pursuant to Section
3.07.

     “Stated Maturity,” when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.

     “Stockholders’ Equity” means, with respect to any corporation,
partnership, joint venture, association, joint stock company, limited liability
company, unlimited liability company,
trust, unincorporated organization or government, or any agency or
political subdivision thereof, stockholders’ equity, as computed in accordance
with generally accepted accounting principles.

     “Subsidiary” means, with respect to any specified Person: any corporation,
association or other business entity of which more than 50% of the total voting
power of securities 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 any partnership (a) the sole general partner or the managing
general partner of which is such Person or

5

 

a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).

     “Trust Indenture Act” means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed, except as provided in
Section 9.05; provided, however, that, in the event the Trust Indenture Act of
1939 is amended after such date, “Trust Indenture Act” means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.

     “Trustee” means the Person named as the “Trustee” in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter “Trustee” shall
mean or include each Person who is then a Trustee hereunder, and if at any time
there is more than one such Person, “Trustee” as used with respect to the
Securities of any series shall mean the Trustee with respect to Securities of
that series.

     “United States” means the United States of America (including the states
thereof and the District of Columbia) and its “possessions,” which include
Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.

     “United States Alien” means any Person who, for United States federal
income tax purposes, is a foreign corporation, a nonresident alien individual,
a nonresident alien or foreign fiduciary of an estate or trust, or a foreign
partnership.

     “U.S. Government Obligations” has the meaning specified in Section 4.01.

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

     “Yield to Maturity,” when used with respect to any Original Issue Discount
Security, means the yield to maturity, if any, set forth on the face thereof.

     Section 1.02. Incorporation by Reference of Trust Indenture Act.

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

     “Bankruptcy Act” means the Bankruptcy Act or Title 11 of the United States
Code.

     “indenture securities” means the Securities.

     “indenture security holder” means a Holder.

     “indenture to be qualified” means this Indenture.

     “indenture trustee” or “institutional trustee” means the Trustee.

     “obligor” on the indenture securities means the Company or any other
obligor on the Securities.

     All terms used in this Indenture that are defined by the Trust Indenture
Act, defined by a Trust Indenture Act reference to another statute or defined
by Commission rule under the Trust Indenture Act and not otherwise defined
herein have the meanings assigned to them therein.

     Section 1.03. Compliance Certificates and Opinions.

6

 

     Except as otherwise expressly provided by this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company 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, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.

     Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include

	(1)	 	a statement that each Person signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
	 
	(2)	 	a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
	 
	(3)	 	a statement that, in the opinion of each such Person, such
Person has made such examination or investigation as is necessary to
enable such Person to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
	 
	(4)	 	a statement as to whether, in the opinion of each such
Person, such condition or covenant has been complied with.

     Section 1.04. Form of Documents Delivered to Trustee.

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

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

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

     Section 1.05. Acts of Holders; Record Dates.

     (a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders of
the Outstanding Securities of all series or one or more series, as the case may
be, may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing. Except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments or record or
both are delivered to the Trustee and, where it is hereby expressly required,
to the Company. Such instrument or instruments and any such record (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the “Act” of the Holders signing such instrument or instruments and so
voting at any such meeting. Proof of execution of any such

7

 

instrument or of a
writing appointing any such agent, or the holding of any Person of a Security,
shall be sufficient for any purpose of this Indenture and (subject to Section
6.01) conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section 1.05. The record of any meeting of Holders of
Securities shall be proved in the manner provided in Section 14.06.

     The Company may set a record date for purposes of determining the identity
of Holders of Securities entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture. If a record date is
fixed, those Persons who were Holders of Outstanding Securities at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled with respect to such Securities to take such action by vote or consent
or to revoke any vote or consent previously given, whether or not such Persons
continue to be Holders after such record date. Promptly after any record date
is set pursuant to this paragraph, the Company, at its own expense, shall cause
notice thereof to be given to the Trustee in writing in the manner provided in
Section 1.06 and to the relevant Holders as set forth in Section 1.07.

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

     (c) The principal amount and serial numbers of Securities held by any
Person, and the date of holding the same, shall be proved by the Security
Register.

     (d) In determining whether the Holders of the requisite principal amount
of Securities have given any request, demand, authorization, direction, notice,
consent or waiver under this Indenture, the principal amount of an Original
Issue Discount Security that may be counted in making such determination and
that shall be deemed to be Outstanding for such purposes shall be equal to the
amount of the principal thereof that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 5.02 at
the time the taking of such action by the Holders of such requisite principal
amount is evidenced to the Trustee for such Securities.

     (e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security. Any consent or waiver of the Holder of any Security shall be
irrevocable for a period of six months after the date of execution thereof, but
otherwise any such Holder or subsequent Holder may revoke the request, demand,
authorization, direction, notice, consent or other Act as to his Security or
portion of his Security; provided, however, that such revocation shall be
effective only if the Trustee receives the notice of revocation before the date
the Act becomes effective.

     Section 1.06. Notices, Etc., to Trustee and Company.

     Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,

	(1)	 	the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust
Office, Attention: Global Trust Service Department, or
	 
	(2)	 	the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph

8

 

	 	 	of this Indenture
or at any other address previously furnished in writing to the
Trustee by the Company, Attention: Corporate Secretary.

     Section 1.07. Notice to Holders; Waiver.

     Where this Indenture provides for notice to Holders of Securities of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at the address of such Holder as it appears
in the Security Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice.

     In case by reason of the suspension of regular mail service, or by reason
of any other cause it shall be impracticable to give such notice to Holders of
Securities by mail, then such notification as shall be made with the approval
of the Trustee shall constitute a sufficient notification for every purpose
hereunder. In any case in which notice to Holders of Securities is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder of a Security, shall affect the sufficiency
of such notice with respect to other Holders of Securities.

     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 Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

     Section 1.08. Conflict With Trust Indenture Act.

     If any provision hereof limits, qualifies or conflicts with any provision
of the Trust Indenture Act or another provision hereof required to be included
in this Indenture by any of the provisions of the Trust Indenture Act, such
provision of the Trust Indenture Act shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that
may be so modified or excluded, the former provision shall be deemed to apply
to this Indenture as so modified or to be excluded.

     Section 1.09. Effect of Headings and Table of Contents.

     The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

     Section 1.10. Successors and Assigns.

     All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether or not so expressed.

     Section 1.11. Separability Clause.

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

     Section 1.12. Benefits of Indenture.

     Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person any benefit or any legal or equitable right, remedy or claim
under this Indenture, other than the parties hereto and their successors
hereunder, any Authenticating Agent, Paying Agent or Security Registrar and the
Holders and any holders of any Senior Indebtedness.

     Section 1.13. Governing Law.

9

 

     This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York, but without giving effect to
applicable principles of conflicts of law to the extent the application of the
laws of another jurisdiction would be required thereby.

     Section 1.14. Legal Holidays.

     In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of principal of, premium (if any) and interest on or any
Additional Amounts with respect to Securities of any series need not be made at
such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date or Redemption Date, or at the Stated Maturity,
provided that no interest shall accrue with respect to such payment for the
period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be.

     Section 1.15. Corporate Obligation.

     No recourse may be taken, directly or indirectly, against any
incorporator, subscriber to the capital stock, stockholder, officer, director
or employee of the Company or the Trustee or of any predecessor or successor of
the Company or the Trustee with respect to the Company’s obligations on the
Securities or the obligations of the Company or the Trustee under this
Indenture or any certificate or other writing delivered in connection herewith.

ARTICLE TWO

SECURITY FORMS

     Section 2.01. Forms Generally.

     The Securities of each series shall be in fully registered form and in
substantially such form or forms as shall be established by or pursuant to one
or more Board Resolutions and set forth in such Board Resolutions, or, to the
extent established pursuant to, rather than set forth in, such Board
Resolutions, an Officers’ Certificate detailing such establishment or in one or
more indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with any law or with any rules or regulations pursuant
thereto, or with any rules of any securities exchange or to conform to general
usage, all as may, consistently herewith, be determined by the officers of the
Company executing such Securities, as evidenced by their execution of the
Securities. A copy of the Board Resolution establishing the form or forms of
Securities of any series shall be delivered to the Trustee at or prior to the
delivery of the Company Order contemplated by Section 3.03 for the
authentication and delivery of such Securities.

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

     Section 2.02. Form of Trustee’s Certificate of Authentication.

     The Trustee’s certificate of authentication shall be in substantially the
following form:

     “This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

	 	 	 
	

	 	

	

	 	as Trustee
	 
	 	 
	

	 	By
	

	 	
 
	

	 	Authorized Signatory”

10

 

     Section 2.03. Securities Issuable in the Form of a Global Security.

     (a) If the Company shall establish pursuant to Section 3.01 that the
Securities of a particular series are to be issued in whole or in part in the
form of one or more Global Securities, then the Company shall execute and the
Trustee shall, in accordance with Section 3.03 and the Company Order delivered
to the Trustee thereunder, authenticate and deliver such Global Security or
Securities, which (i) shall represent, and shall be denominated in an amount
equal to the aggregate principal amount of the Outstanding Securities of such
series to be represented by such Global Security or Securities, (ii) may
provide that the aggregate amount of Outstanding Securities represented thereby
may from time to time be increased or reduced to reflect exchanges, (iii) shall
be registered in the name of the Depositary for such Global Security or
Securities or its nominee, (iv) shall be delivered by the Trustee to the
Depositary or pursuant to the Depositary’s instruction and (v) shall bear a
legend in accordance with the requirements of the Depositary.

     (b) Notwithstanding any other provision of this Section or of Section
3.05, except as contemplated by the provisions of Section 2.03 below, unless
the terms of a Global Security expressly permit such Global Security to be
exchanged in whole or in part for individual Securities, a Global Security may
be transferred, in whole but not in part and in the manner provided in Section
3.05, only to a nominee of the Depositary for such Global Security, or to the
Depositary, or to a successor Depositary for such Global Security selected or
approved by the Company, or to a nominee of such successor Depositary.

     (c) (1) If at any time the Depositary for a Global Security notifies the
Company that it is unwilling or unable to continue as the Depositary for such
Global Security or if at any time the Depositary for the Securities for such
series shall no longer be eligible or in good standing under the Exchange Act,
or other applicable statute or regulation, the Company shall appoint a
successor Depositary with respect to such Global Security. If a successor
Depositary for such Global Security is not appointed by the Company within 90
days after the Company receives such notice or becomes aware of such
ineligibility, the Company will execute, and the Trustee, upon receipt of a
Company Order for the authentication and delivery of Securities of such series
in the form of definitive certificates in exchange for such Global Security,
will authenticate and deliver Securities of such series in the form of
definitive certificates of like tenor and terms in an aggregate principal
amount equal to the principal amount of the Global Security in exchange for
such Global Security. Such Securities will be issued to and registered in the
name of such Person or Persons as are specified by the Depositary.

     (2) The Company may at any time and in its sole discretion determine that
the Securities of any series issued or issuable in the form of one or more
Global Securities shall no longer be represented by such Global Security or
Securities. In any such event the Company will execute, and the Trustee, upon
receipt of a Company Request for the authentication and delivery of Securities
in the form of definitive certificates in exchange in whole or in part for such
Global Security, will authenticate and deliver without service charge to each
Person specified by
the Depositary Securities in the form of definitive certificates of like
tenor and terms in an aggregate principal amount equal to the principal amount
of such Global Security representing such series, or the aggregate principal
amount of such Global Securities representing such series, in exchange for such
Global Security or Securities.

     (3) If specified by the Company pursuant to Section 3.01 with respect to
Securities issued or issuable in the form of a Global Security, the Depositary
for such Global Security may surrender such Global Security in exchange in
whole or in part for Securities in the form of definitive certificates of like
tenor and terms on such terms as are acceptable to the Company and such
Depositary. Thereupon the Company shall execute, and the Trustee shall
authenticate and deliver, without service charge, (A) to each Person specified
by such Depositary a new Security or Securities of the same series of like
tenor and terms and any authorized denomination as requested by such Person in
aggregate principal amount equal to and in exchange for such Person’s
beneficial interest in the Global Security and (B) to such Depositary a new
Global Security of like tenor and terms and in an authorized denomination equal
to the difference, if any, between the principal amount of the surrendered
Global Security and the aggregate principal amount of Securities delivered to
Holders thereof.

     (4) In any exchange provided for in any of the preceding three
subparagraphs, the Company shall execute and the Trustee shall authenticate and
deliver Securities in the form of definitive certificates in authorized

11

 

denominations. Upon the exchange of the entire principal amount of a Global
Security for Securities in the form of definitive certificates, such Global
Security shall be canceled by the Trustee. Except as provided in the
immediately preceding subparagraph, Securities issued in exchange for a Global
Security pursuant to this Section shall be registered in such names and in such
authorized denominations as the Depositary for such Global Security, acting
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. Provided that the Company and the Trustee have so
agreed, the Trustee shall deliver such Securities to the Persons in whose names
the Securities are so to be registered.

     (5) Any endorsement of a Global Security to reflect the principal amount
thereof, or any increase or decrease in such principal amount, or changes in
the rights of Holders of Outstanding Securities represented thereby shall be
made in such manner and by such Person or Persons as shall be specified in or
pursuant to any applicable letter of representations or other arrangement
entered into with, or procedures of, the Depositary with respect to such Global
Security or in the Company Order delivered or to be delivered pursuant to
Section 3.03 with respect thereto. Subject to the provisions of Section 3.03,
the Trustee shall deliver and redeliver any such Global Security in the manner
and upon instructions given by the Person or Persons specified in or pursuant
to any applicable letter of representations or other arrangement entered into
with, or procedures of, the Depositary with respect to such Global Security or
in any applicable Company Order. If a Company Order pursuant to Section 3.03 is
so delivered, any instructions by the Company with respect to such Global
Security contained therein shall be in writing but need not be accompanied by
or contained in an Officer’s Certificate and need not be accompanied by an
Opinion of Counsel.

     (6) The Depositary or, if there be one, its nominee, shall be the Holder
of a Global Security for all purposes under this Indenture; and beneficial
owners with respect to such Global Security shall hold their interests pursuant
to applicable procedures of such Depositary. The Company, the Trustee and the
Security Registrar shall be entitled to deal with such Depositary for all
purposes of this Indenture relating to such Global Security (including the
payment of principal, premium, if any, and interest (including any Additional
Interest) and the giving of instructions or directions by or to the beneficial
owners of such Global Security as the sole Holder of such Global Security and
shall have no obligations to the beneficial owners thereof (including any
direct or indirect participants in such Depositary). None of the Company, the
Trustee, any Paying Agent or the Security Registrar shall have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of a Global Security
in or pursuant to any applicable letter of representations or other arrangement
entered into with, or procedures of, the Depositary with respect to such Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.

ARTICLE THREE

THE SECURITIES

     Section 3.01. Amount Unlimited; Issuable in Series.

     The aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is unlimited.

     The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers’
Certificate, or established in one or more indentures supplemental hereto,
prior to the issuance of Securities of any series,

	(1)	 	the title of the Securities of such series (which shall
distinguish the Securities of the series from all other Securities);
	 
	(2)	 	any limit upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered
under this Indenture (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or
in lieu of, other Securities of such series pursuant to Section
2.03, 3.04, 3.05, 3.06, 9.06 or 11.07);

12

 

	(3)	 	the date or dates on which the principal or premium (if any)
of the Securities of such series is payable or the method of
determination thereof;
	 
	(4)	 	the rate or rates, or the method of determination thereof, at
which the Securities of such series shall bear interest, if any,
whether and under what circumstances Additional Amounts with respect
to such Securities shall be payable, the date or dates from which
such interest shall accrue, the Interest Payment Dates on which such
interest shall be payable and, if other than as set forth in Section
1.01, the Regular Record Date for the interest payable on any
Securities on any Interest Payment Date;
	 
	(5)	 	the place or places where, subject to the provisions of
Section 10.02, the principal of, premium (if any) and interest on or
any Additional Amounts with respect to the Securities of such series
shall be payable;
	 
	(6)	 	the period or periods within which, the price or prices
(whether denominated in cash, securities or otherwise) at which and
the terms and conditions upon which Securities of such series may be
redeemed, in whole or in part, at the option of the Company, if the
Company is to have that option, and the manner in which the Company
must exercise any such option, if different from those set forth
herein;
	 
	(7)	 	the Senior Indebtedness to which the Securities of such
series are subordinated, and the terms of such subordination;
	 
	(8)	 	the obligation, if any, of the Company to redeem, purchase or
repay Securities of such series pursuant to any sinking fund,
amortization or analogous provisions or at the option of a Holder
thereof and the period or periods within which, the price or prices
(whether denominated in cash, securities or otherwise) at which and
the terms and conditions upon which, Securities of such series shall
be redeemed, purchased or repaid in whole or in part pursuant to
such obligation;
	 
	(9)	 	the denomination in which any Securities of that series shall
be issuable, if other than denominations of $1,000 and any integral
multiple thereof;
	 
	(10)	 	if other than the Trustee, the identity of the Securities
Registrar and/or the Paying Agent;
	 
	(11)	 	the currency or currencies (including composite currencies),
if other than Dollars, or the form, including equity securities,
other debt securities (including Securities), warrants or any other
securities or property of the Company or any other Person, in which
payment of the principal of, premium (if any) and interest on or any
Additional Amounts with respect to the Securities of such series
shall be payable;
	 
	(12)	 	if the principal of, premium (if any) or interest on or any
Additional Amounts with respect to the Securities of such series are
to be payable, at the election of the Company or a Holder thereof,
in a currency or currencies (including composite currencies) other
than that in which the Securities are stated to be payable, the
currency or currencies (including composite currencies) in which
payment of the principal of, premium (if any) and interest on or any
Additional Amounts with respect to Securities of such series as to
which such election is made shall be payable, and the periods within
which and the terms and conditions upon which such election is to be
made;
	 
	(13)	 	if the amount of payments of principal of, premium (if any)
and interest on or any Additional Amounts with respect to the
Securities of such series may be determined with reference to any
commodities, currencies or indices, values, rates or prices or any
other index or formula, the manner in which such amounts shall be
determined;

13

 

	(14)	 	if other than the entire principal amount thereof, the
portion of the principal amount of Securities of such series that
shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 5.02;
	 
	(15)	 	any additional means of satisfaction and discharge of this
Indenture with respect to Securities of such series pursuant to
Section 4.01, any additional conditions to discharge pursuant to
Section 4.01 or 4.03 and the application, if any, of Section 4.03;
	 
	(16)	 	whether the Securities of the series will be guaranteed by
any Subsidiary of the Company, and the terms of any subordination of
such guarantees;
	 
	(17)	 	any deletions or modifications of or additions to the
definitions set forth in Section 1.01, Events of Default set forth
in Section 5.01 or covenants of the Company set forth in Article Ten
pertaining to the Securities of such series or made for the benefit
of the Holders thereof;
	 
	(18)	 	if the Securities of such series are to be convertible into
or exchangeable for equity securities, other debt securities
(including Securities), warrants or any other securities or property
of the Company or any other Person, at the option of the Company or
the Holder or upon the occurrence of any condition or event, the
terms and conditions for such conversion or exchange;
	 
	(19)	 	whether any of such Securities will be subject to certain
optional interest rate reset provisions;
	 
	(20)	 	whether the Securities of the series shall be issued in whole
or in part in the form of a Global Security or Securities; the terms
and conditions, if any, upon which such Global Security or
Securities may be exchanged in whole or in part for certificated
Securities of such series and of like tenor of any authorized
denomination and the circumstances under which such exchange may
occur, if other than in the manner provided for in Section 2.03; the
Depositary for such Global Security or Securities; and the form of
any legend or legends to be borne by any such Global Security in
addition to or in lieu of the legend referred to in Section 2.03;
	 
	(21)	 	the additions or changes, if any, to the Indenture with
respect to such Securities as shall be necessary to permit or
facilitate the issuance of such Securities in bearer form,
registered or not registrable as to principal, and with or without
interest coupons; and
	 
	(22)	 	any other terms of such series (which terms shall not be
inconsistent with the provisions of this Indenture).

     All Securities of any one series shall be substantially identical except
as to denomination and date and except as may otherwise be provided in or
pursuant to the Board Resolution referred to above and (subject to Section
3.03) set forth, or determined in the manner provided, in the Officers’
Certificate referred to above or in any such indenture supplemental hereto.

     At the option of the Company, interest on the Securities of any series
that bears interest may be paid by mailing a check to the address of any Holder
as such address shall appear in the Security Register.

     If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action together
with such Board Resolution shall be certified by the Secretary or an Assistant
Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Officers’ Certificate setting forth the terms of the series.

     Section 3.02. Denominations.

     The Securities of each series shall be issuable in such denominations as
shall be specified as contemplated by Section 3.01. In the absence of any such
provisions with respect to the Securities of any series, the Securities of such
series denominated in Dollars shall be issuable in denominations of $1,000 and
any integral multiple thereof.

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Unless otherwise provided as contemplated by
Section 3.01 with respect to any series of Securities, any Securities of a
series denominated in a currency other than Dollars shall be issuable in
denominations that are the equivalent, as determined by the Company by
reference to the noon buying rate in The City of New York for cable transfers
for such currency (“Exchange Rate”), as such rate is reported or otherwise made
available by the Federal Reserve Bank of New York, on the applicable issue date
for such Securities, of $1,000 and any integral multiple thereof.

     Section 3.03. Execution, Authentication, Delivery and Dating.

     The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President, its Treasurer or one of its Vice Presidents, under
its corporate seal reproduced thereon or affixed thereto attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers and the corporate seal on the Securities may be manual or facsimile.

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

     At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities, and the Trustee in
accordance with the Company Order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.

     If the form or terms of the Securities of a series have been established
in or pursuant to one or more Board Resolutions or any other method permitted
by Sections 2.01 and 3.01, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such
Securities, the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in relying upon, an Opinion of Counsel stating,

	(1)	 	that the form of such Securities has been established in
conformity with the provisions of this Indenture;
	 
	(2)	 	that the terms of such Securities have been established in
conformity with the provisions of this Indenture; and
	 
	(3)	 	that such Securities when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute
legal, valid and binding obligations of the Company, enforceable in
accordance with their terms, except as such enforcement is subject
to the effect of (i) bankruptcy, insolvency, fraudulent conveyance,
reorganization or other laws relating to or affecting creditors’
rights and (ii) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).

     If not all the Securities of any series are to be issued at one time, it
shall not be necessary to deliver an Opinion of Counsel at the time of issuance
of each Security, but such opinion with appropriate modifications shall be
delivered at or before the time of issuance of the first Security of such
series. The Trustee shall not be required to authenticate such Securities if
the issue of such Securities pursuant to this Indenture will affect the
Trustee’s own rights, duties or immunities under the Securities and this
Indenture or otherwise in a manner not reasonably acceptable to the Trustee.

     Each Security shall be dated the date of its authentication.

     No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence,

15

 

and the only evidence, that such
Security has been duly authenticated and delivered hereunder. Notwithstanding
the foregoing, if any Security shall have been authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided in Section
3.09 together with a written statement (which need not comply with Section 1.03
and need not be accompanied by an Opinion of Counsel) stating that such
Security has never been issued and sold by the Company, for all purposes of
this Indenture such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of this
Indenture.

     Section 3.04. Temporary Securities.

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

     Except in the case of temporary Securities in global form (which shall be
exchanged in accordance with the provisions of the following paragraphs), if
temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series, the Company shall execute and deliver a
Company Order requesting the Trustee to authenticate and deliver and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities of the same series of authorized denominations.
Until so exchanged the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.

     All Outstanding temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of the same series and of like tenor authenticated and delivered hereunder.

     Section 3.05. Registration, Registration of Transfer and Exchange.

     The Company shall cause to be kept for each series of Securities at one of
the offices or agencies maintained pursuant to Section 10.02 a register (the
register maintained in such office and in any other office or agency of the
Company in a Place of Payment being herein sometimes collectively referred to
as the “Security Register”) in which, subject to such reasonable regulations as
it may prescribe, the Company shall provide for the registration of Securities
and of transfers of Securities of such series. The Trustee is hereby initially
appointed “Security Registrar” for the purpose of registering Securities and
transfers of Securities as herein provided.

     Except as set forth in Section 2.03 or as may be provided pursuant to
Section 3.01, upon surrender for registration of transfer of any Security of
any series at the office or agency in a Place of Payment for that series, the
Company shall execute and deliver a Company Order requesting the Trustee to
authenticate and deliver and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series and of like tenor, of any authorized denominations and of a
like aggregate principal amount.

     At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series and of like tenor, of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at such office or agency, and upon payment, if the
Company shall so require, of the charges hereinafter provided. Whenever any
Securities are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Securities which the Holder making
the exchange is entitled to receive.

16

 

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

     Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.

     No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchange pursuant to Section 3.04, 9.06 or 11.07 not involving any transfer.

     The Company shall not be required (i) to issue, register the transfer of
or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of such series selected for redemption and ending at the close of
business on the day of the mailing of the relevant notice of redemption or (ii)
to register the transfer of or exchange any Security so selected for redemption
in whole or in part, except the unredeemed portion of any Security being
redeemed in part.

     Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book entry system maintained by the Holder of
such Global Security (or its agent), and that ownership of a beneficial
interest in the Security shall be required to be reflected in a book entry.

     Section 3.06. Mutilated, Destroyed, Lost and Stolen Securities.

     If any mutilated Security is surrendered to the Trustee, the Company shall
execute and deliver a Company Order requesting the Trustee to authenticate and
deliver and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.

     If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon the Company’s request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.

     In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.

     Upon the issuance of any new Security under this Section 3.06, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fee and expenses of the Trustee) connected therewith.

     Every new Security of any series issued pursuant to this Section 3.06 in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities of that series duly issued hereunder.

     The provisions of this Section 3.06 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.

17

 

     Section 3.07. Payment of Interest; Interest Rights Preserved.

     Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date or within five days thereafter
shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest. Unless otherwise provided with respect to the
Securities of any series, payment of interest may be made at the option of the
Company by check mailed or delivered to the address of any Person entitled
thereto as such address shall appear in the Security Register.

     Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date or within
five days thereafter (herein called “Defaulted Interest”) shall forthwith cease
to be payable to the Holder on the relevant Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may 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 Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security of such
series and the date of the proposed payment, and at the same time
the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause (1)
provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and
at the expense of the
Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of Securities
of such series at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date.
The Trustee may, in its discretion, in the name and at the expense
of the Company, cause a similar notice to be published at least
once in an Authorized Newspaper, but such publication shall not be
a condition precedent to the establishment of 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
Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the
following clause (2).
	 
	(2)	 	The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent
with the requirements of any securities exchange on which such
Securities may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause (2), such manner of
payment shall be deemed practicable by the Trustee.

     Subject to the foregoing provisions of this Section 3.07, each Security
delivered under this Indenture, upon registration of transfer of, in exchange
for or in lieu of, any other Security, shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.

     Section 3.08. Persons Deemed Owners.

     Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of, premium (if any) and
(subject to Sections 3.05 and 3.07) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and

18

 

neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

     Section 3.09. Cancellation.

     All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee.
All Securities so delivered shall be promptly canceled by the Trustee. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section 3.09,
except as expressly permitted by this Indenture. All canceled Securities held
by the Trustee shall be disposed of by the Trustee in accordance with its
customary procedures, unless the Trustee is otherwise directed by a Company
Order.

     Section 3.10. Computation of Interest.

     Except as otherwise specified as contemplated by Section 3.01 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a year comprising twelve 30-day months.

     Section 3.11. CUSIP Numbers.

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

ARTICLE FOUR

SATISFACTION AND DISCHARGE

     Section 4.01. Satisfaction and Discharge of Indenture.

     This Indenture shall upon Company Request cease to be of further effect
with respect to Securities of a series, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to Securities of such series, when

	(1)	 	either

	(A)	 	all Securities of such series theretofore
authenticated and delivered (other than (i) Securities that
have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 3.06, and (ii)
Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 10.03) have been
delivered to the Trustee for cancellation;
	 
	(B)	 	with respect to all Outstanding Securities of
such series not theretofore delivered to the Trustee for
cancellation, the Company has deposited or caused to be
deposited with the Trustee under the terms of an irrevocable
trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust solely for the benefit of the
Holders of Outstanding Securities for that purpose, money or
U.S. Government Obligations maturing as to principal and
interest in such amounts and at such times as will, together
with the income to accrue thereon, without consideration of
any reinvestment thereof, be

19

 

	 	 	sufficient to pay and discharge
the entire indebtedness on all Outstanding Securities of such
series not theretofore delivered to the Trustee for
cancellation for principal of, premium (if any) and interest
on or any Additional Amounts with respect to such Securities
to the Stated Maturity or any Redemption Date contemplated by
the penultimate paragraph of this Section 4.01, as the case
may be; or
	 
	(C)	 	the Company has properly fulfilled such other
means of satisfaction and discharge as is specified, as
contemplated by Section 3.01, to be applicable to the
Securities of such series;

	(2)	 	the Company has paid or caused to be paid all other sums
payable hereunder by the Company with respect to the Outstanding
Securities of such series;
	 
	(3)	 	the Company has complied with any other conditions specified
pursuant to Section 3.01 to be applicable to the discharge of
Securities of such series pursuant to this Section 4.01;
	 
	(4)	 	the Company has delivered to the Trustee an Officers’
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture with respect to the
Outstanding Securities of such series have been complied with;
	 
	(5)	 	if the conditions set forth in subclause (A) of clause (1) of
Section 4.01 have not been satisfied, and unless otherwise specified
pursuant to Section 3.01 for the Securities of such series, the
Company has delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of Securities of such series will not
recognize income, gain or loss for United States federal income
tax purposes as a result of such deposit, satisfaction and
discharge and will be subject to United States federal income tax
on the same amount and in the same manner and at the same time as
would have been the case if such deposit, satisfaction and
discharge had not occurred; and
	 
	(6)	 	no Default or Event of Default with respect to the Securities
of such issue shall have occurred and be continuing on the date of
any such deposit or, in so far as clause (5) or (6) of Section 5.01
is concerned, at any time in the period ending on the 91st day after
the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period).

     For the purposes of this Indenture, “U.S. Government Obligations” means
direct noncallable obligations of, or noncallable obligations the payment of
principal of and interest on which is guaranteed by, the United States of
America, or to the payment of which obligations or guarantees the full faith
and credit of the United States of America is pledged, or beneficial interests
in a trust the corpus of which consists exclusively of money or such
obligations or a combination thereof.

     If any Outstanding Securities of such series are to be redeemed prior to
their Stated Maturity, whether pursuant to any optional redemption provisions
or in accordance with any mandatory sinking fund requirement, the trust
agreement referred to in subclause (B) of clause (1) of this Section 4.01 shall
provide therefor and the Company shall make such arrangements as are
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.

     Notwithstanding the satisfaction and discharge of this Indenture with
respect to the Outstanding Securities of such series pursuant to this Section
4.01, the obligations of the Company to the Trustee under Section 6.07, the
obligations of the Company to any Authenticating Agent under Section 6.14 and,
except for a discharge pursuant to subclause (A) of clause (1) of this Section
4.01, the obligations of the Company under Sections 3.05, 3.06, 4.04, 10.01 and
10.02 and the obligations of the Trustee under Section 4.02 and the last
paragraph of Section 10.03 shall survive.

     Section 4.02. Application of Trust Money.

20

 

     Subject to the provisions of the last paragraph of Section 10.03, all
money deposited with the Trustee pursuant to Section 4.01 shall be held in
trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal of, premium (if
any) and interest on or any Additional Amounts with respect to Securities of
such Securities for the payment of which such money has been deposited with the
Trustee.

     Section 4.03. Discharge of Liability on Securities of Any Series.

     If this Section 4.03 is specified, as contemplated by Section 3.01, to be
applicable to Securities of any series, the Company shall be deemed to have
paid and discharged the entire indebtedness on all the Outstanding Securities
of such series, the obligation of the Company under this Indenture and the
Securities of such series to pay the principal of, premium (if any) and
interest on and any Additional Amounts with respect to Securities of such
series shall cease, terminate and be completely discharged, and the Trustee, at
the expense of the Company, shall execute proper instruments acknowledging such
satisfaction and discharge, when

	(1)	 	the Company has complied with the provisions of Section 4.01
of this Indenture (other than any additional conditions specified
pursuant to Section 3.01 and clause (3) of Section 4.01 and except
that the Opinion of Counsel referred to in clause (5) of Section
4.01 shall state that it is based on a ruling by the Internal
Revenue Service or other change since the date hereof under
applicable Federal income tax law) with respect to all Outstanding
Securities of such series,
	 
	(2)	 	the Company has delivered to the Trustee a Company Request
requesting such satisfaction and discharge,
	 
	(3)	 	the Company has complied with any other conditions specified
pursuant to Section 3.01 to be applicable to the discharge of
Securities of such series pursuant to this Section 4.03, and
	 
	(4)	 	the Company has delivered to the Trustee an Officers’
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the discharge
of the indebtedness on the Outstanding Securities of such series
have been complied with.

     Upon the satisfaction of the conditions set forth in this Section 4.03
with respect to all the Outstanding Securities of any series, the terms and
conditions of such series, including the terms and conditions with respect
thereto set forth in this Indenture, shall no longer be binding upon, or
applicable to, the Company; provided that, the Company shall not be discharged
from any payment obligations in respect of Securities of such series which are
deemed not to be Outstanding under clause (iii) of the definition thereof if
such obligations continue to be valid obligations of the Company under
applicable law or pursuant to Section 3.05 or 3.06.

     Section 4.04. Reinstatement.

     If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations deposited with respect to Securities of any series in
accordance with Section 4.01 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company’s
obligations under this Indenture with respect to the Securities of such series
and the Securities of such series shall be revived and reinstated as though no
deposit had occurred pursuant to Section 4.01 until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 4.01; provided, however, that if the
Company has made any payment of principal of, premium (if any) or interest on
or any Additional Amounts with respect to any Securities because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.

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ARTICLE FIVE

REMEDIES

     Section 5.01. Events of Default.

     “Event of Default,” wherever used herein with respect to Securities of any
series, means any one of the following events which shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall
be occasioned by the subordination provisions applicable to any Securities or
be voluntary or involuntary or 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), unless it is either inapplicable to a
particular series or it is specifically deleted or modified in or pursuant to
the supplemental indenture or Board Resolution establishing such series of
Securities or in the form of Security for such series:

	(1)	 	default in the payment of any interest on or any Additional
Amounts with respect to any Security of that series when such
interest or Additional Amounts become due and payable, and
continuance of such default for a period of 30 days; or
	 
	(2)	 	default in the payment of the principal of or premium (if
any) on any Security of that series at its Maturity; or
	 
	(3)	 	default in the deposit of any mandatory sinking fund payment,
when and as due by the terms of a Security of that series, and
continuance of such default for a period of 30 days; or
	 
	(4)	 	default in the performance or breach of any covenant of the
Company in this Indenture (other than a covenant a default in whose
performance or whose breach is elsewhere in this Section 5.01
specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of one or more series of Securities other than that series), and
continuance of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of all Outstanding
Securities a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a
“Notice of Default” hereunder; or
	 
	(5)	 	the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the
Company under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
	 
	(6)	 	the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under
any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it, of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law,
or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of
the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts
generally as

22

 

	 	 	they become due, or the taking of corporate action by
the Company in furtherance of any such action; or
	 
	(7)	 	any other Event of Default provided with respect to
Securities of that series.

     Notwithstanding the foregoing provisions of this Section 5.01, if the
principal of, premium (if any) or any interest on or any Additional Amounts
with respect to any Security is payable in a currency or currencies (including
a composite currency) other than Dollars and such currency or currencies are
not available to the Company for making payment thereof due to the imposition
of exchange controls or other circumstances beyond the control of the Company
(a “Conversion Event”), the Company will be entitled to satisfy its obligations
to Holders of the Securities by making such payment in Dollars in an amount
equal to the Dollar equivalent of the amount payable in such other currency, as
determined by the Company by reference to the Exchange Rate, as such Exchange
Rate is certified for customs purposes by the Federal Reserve Bank of New York
on the date of such payment, or, if such rate is not then available, on the
basis of the most recently available Exchange Rate. Notwithstanding the
foregoing provisions of this Section 5.01, any payment made under such
circumstances in Dollars where the required payment is in a currency other than
Dollars will not constitute an Event of Default under this Indenture.

     Promptly after the occurrence of a Conversion Event with respect to the
Securities of any series, the Company shall give written notice thereof to the
Trustee; and the Trustee, promptly after receipt of such notice, shall give
notice thereof in the manner provided in Section 1.07 to the Holders of such
series. Promptly after the making of any payment in Dollars as a result of a
Conversion Event with respect to the Securities of any series, the Company
shall give notice in the manner provided in Section 1.07 to the Holders of such
series, setting forth the applicable Exchange Rate and describing the
calculation of such payments.

     Section 5.02. Acceleration of Maturity; Rescission and Annulment.

     If an Event of Default with respect to any Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the Trustee
or the Holders of not less than 25% in principal amount of the Outstanding Securities of (i) the series with respect to which such
default has occurred, in the case of an Event of Default described in clause
(1), (2), (3), (4) (if the Event of Default under clause (4) is with respect to
less than all series of Securities then outstanding) or (7) of Section 5.01, or
(ii) all series of Securities, in the case of an Event of Default described in
clause (4) (if the Event of Default under clause (4) is with respect to all
series of Securities then outstanding), (5) or (6) of Section 5.01, may declare
the principal amount (or, if any such Securities are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all of the Securities of the series with respect to
which such default has occurred, or all series, as the case may be, to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such amount shall
become immediately due and payable.

     At any time after such a declaration of acceleration with respect to
Securities of any series (or of all series, as the case may be) has been made,
the Holders of a majority in principal amount of the Outstanding Securities of
that series (or of all series, as the case may be), by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if

	(1)	 	the Company has paid or deposited with the Trustee a sum
sufficient to pay

	(A)	 	all overdue interest on, and any Additional
Amounts with respect to, all Securities of that series (or of
all series, as the case may be),
	 
	(B)	 	the principal of or premium (if any) on any
Securities of that series (or of all series, as the case may
be) which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates
prescribed therefor in such Securities (in the case of
Original Issue Discount Securities, the Securities’ Yield to
Maturity),

23

 

	(C)	 	to the extent that payment of such interest is
lawful, interest upon overdue interest and any Additional
Amounts at the rate or rates prescribed therefor in such
Securities (in the case of Original Issue Discount Securities,
the Securities’ Yield to Maturity), and
	 
	(D)	 	all sums paid or advanced by the Trustee
hereunder, the compensation, expenses, disbursements and
advances due to Trustee under Section 6.07, and all other
amounts due under Section 6.07;

	(2)	 	all Events of Default with respect to Securities of that
series (or of all series, as the case may be), other than the
nonpayment of the principal of Securities of that series (or of all
series, as the case may be) which have become due solely by such
declaration of acceleration, have been cured or waived as provided
in Section 5.13; and
	 
	(3)	 	the rescission would not conflict with any final judgment or
decree of a court of competent jurisdiction.

No such rescission shall affect any subsequent default or impair any right consequent thereon.

     Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee.

     The Company covenants that if

	(1)	 	default is made in the payment of any installment of interest
on, or any Additional Amounts with respect to, any Security of any
series when such interest or Additional Amounts shall have become
due and payable and such default continues for a period of 30 days,
or
	 
	(2)	 	default is made in the payment of the principal of or premium
(if any) on any Security at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal of, premium (if any) and interest on or any Additional
Amounts with respect to such Securities and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal,
premium (if any) and on any overdue interest or Additional Amounts, at the rate
or rates prescribed therefor in such Securities (or in the case of Original
Issue Discount Securities, the Securities’ Yield to Maturity), and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and all
other amounts due the Trustee under Section 6.07.

     If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.

     If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

     Section 5.04. Trustee May File Proofs of Claim.

     In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee

24

 

(irrespective of whether the principal (or lesser amount
in the case of Original Issue Discount Securities) of the Securities shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal of, premium (if any), interest on or any
Additional Amounts with respect to such Securities) shall be entitled and
empowered, by intervention in such proceeding or otherwise,

	(1)	 	to file and prove a claim for the whole amount of principal
(or lesser amount in the case of Original Issue Discount Securities)
(and premium, if any) and interest and any Additional Amounts owing
and unpaid in respect of the Securities and to file such other
papers or documents as may be necessary or advisable to have the
claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
	 
	(2)	 	to collect and receive any monies or other property payable
or deliverable on any such claims and to distribute the same; and
any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount
due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07.

     Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceedings; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official.

     Section 5.05. Trustee May Enforce Claims Without Possession of Securities
or Coupons.

     All rights of action and claim under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without possession of any of the
Securities or the production thereof in any proceeding relating thereto; any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust; after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.07, any
recovery of judgment shall be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.

     Section 5.06. Application of Money Collected.

     Subject to the subordination provisions applicable to any series of
Securities, any money collected by the Trustee pursuant to this Article Five
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
of, premium (if any) or interest on or any Additional Amounts with respect to
such Securities, upon presentation of the Securities, and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully paid:

     FIRST: To the payment of all amounts due the Trustee under Section 6.07;

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

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

25

 

     To the fullest extent allowed under applicable law, if for the purpose of
obtaining judgment against the Company in any court it is necessary to convert
the sum due in respect of the principal of, premium (if any) or interest on or
any Additional Amounts with respect to the Securities of any series (the
“Required Currency”) into a currency in which a judgment will be rendered (the
“Judgment Currency”), the rate of exchange used shall be the rate at which in
accordance with normal banking procedures the Trustee could purchase in The
City of New York the Required Currency with the Judgment Currency on the
Business Day in the City of New York next preceding that on which final
judgment is given. Neither the Company nor the Trustee shall be liable for any
shortfall nor shall it benefit from any windfall in payments to Holders of
Securities under this Section 5.06 caused by a change in exchange rates between
the time the amount of a judgment against it is calculated as above and the
time the Trustee converts the Judgment Currency into the Required Currency to
make payments under this Section 5.06 to Holders of Securities, but payment of
such judgment shall discharge all amounts owed by the Company on the claim or
claims underlying such judgment.

     Section 5.07. Limitation on Suits.

     Subject to Section 5.08, no Holder of any Security of any series shall
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless

	(1)	 	an Event of Default with respect to Securities of such series
shall have occurred and be continuing and such Holder has previously
given written notice to the Trustee of such continuing Event of
Default;
	 
	(2)	 	the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
	 
	(3)	 	such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
	 
	(4)	 	the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
	 
	(5)	 	no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series (or of all series, as the case may be); it being understood
and intended that no one or more of such Holders shall have any
right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the
rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to
enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all of such
Holders.

     Section 5.08. Unconditional Right of Holders to Receive Principal, Premium
and Interest.

     Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of, premium (if any) and (subject to Section 3.07)
interest on or any Additional Amounts with respect to such Security on the
Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to institute suit for the enforcement
of any such payment on or after such respective dates, and such rights shall
not be impaired or affected without the consent of such Holder.

     Section 5.09. Restoration of Rights and Remedies.

     If the Trustee or any Holder of any Security has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been

26

 

determined adversely
to the Trustee or to such Holder, then and in every such case, the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.

     Section 5.10. Rights and Remedies Cumulative.

     Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.06, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.

     Section 5.11. Delay or Omission Not Waiver.

     No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article Five or
by law to the Trustee or to the Holders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the Holders, as the
case may be.

     Section 5.12. Control by Holders.

     With respect to Securities of any series, the Holders of a majority in
principal amount of the Outstanding Securities of such series 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, relating to or arising under an Event of Default
described in clause (1), (2), (3) or (7) of Section 5.01, and with respect to
all Securities the Holders of a majority in principal amount of all Outstanding
Securities shall have the right to direct the time, method and place of
conducting any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, not relating to or arising under such an Event
of Default, provided that in each such case

	(1)	 	the Trustee shall have the right to decline to follow any
such direction if the Trustee, being advised by counsel, determines
that the action so directed may not lawfully be taken or would
conflict with this Indenture or if the Trustee in good faith shall,
by a Responsible Officer, determine that the proceedings so directed
would involve it in personal liability or be unjustly prejudicial to
the Holders not taking part in such direction, and
	 
	(2)	 	the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.

     Section 5.13. Waiver of Past Defaults.

     Subject to Sections 5.08 and 9.02, the Holders of a majority in principal
amount of the Outstanding Securities of any series may on behalf of the Holders
of all the Securities of such series waive any past default hereunder with
respect to such series and its consequences, and the Holders of a majority in
principal amount of all Outstanding Securities may on behalf of the Holders of
all Securities waive any other past default hereunder and its consequences,
except in each case a default

	(1)	 	in the payment of the principal of, premium (if any) or
interest on or any Additional Amounts with respect to any Security,
or
	 
	(2)	 	in respect of a covenant or provision hereof that under
Article Nine cannot be modified or amended without the consent of
the Holder of each Outstanding Security affected.

27

 

     Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

     Section 5.14. Undertaking for Costs.

     All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken
or omitted by it as Trustee, the filing by any party litigant in such suit of
an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys’ fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant.
The provisions of this Section 5.14 shall not apply to any suit instituted by
the Company, by the Trustee, by any Holder or group of Holders holding in the
aggregate more than 10% in principal amount of the Outstanding Securities of
any series, or by any Holder for the enforcement of the payment of the
principal of, premium (if any) or interest on or any Additional Amounts with
respect to any Security on or after the Stated Maturity or Maturities expressed
in such Security (or, in the case of redemption, on or after the Redemption
Date).

     Section 5.15. Waiver of Stay or Extension Laws.

     The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.

ARTICLE SIX

THE TRUSTEE

     Section 6.01. Certain Duties and Responsibilities.

     (a) Except during the continuance of an Event of Default with respect to the Securities of any series,

	(1)	 	the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
	 
	(2)	 	in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or investigate
the accuracy of any mathematical calculations or other facts stated
therein).

     (b) In case an Event of Default has occurred and is continuing with
respect to the Securities of any series, 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.

     (c) 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

28

 

	(1)	 	this Section 6.01(c) shall not be construed to limit the
effect of Section 6.01(a);
	 
	(2)	 	the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent
facts;
	 
	(3)	 	the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
Outstanding Securities of any series or of all series, determined as
provided in Section 5.12, 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 with respect to the Securities of such series; and
	 
	(4)	 	no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity, satisfactory to the Trustee in its reasonable
judgement, against such risk or liability is not reasonably assured
to it.

     (d) Whether or not therein expressly so 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
6.01.

     Section 6.02. Notice of Defaults.

     Within 90 days after the occurrence of any Default or Event of Default
with respect to the Securities of any series, the Trustee shall give notice of
such Default or Event of Default known to the Trustee to all Holders of
Securities of such series in the manner provided in Section 1.07, unless such
default shall have been cured or waived; provided, however, that, except in the
case of a Default or Event of Default in the payment of the principal of,
premium (if any) or interest on or any Additional Amounts with respect to any
Security of such series or in the payment of any sinking fund installment with
respect to Securities of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
interest of the Holders of Securities of such series; and provided, further,
that in the case of any Default or Event of Default of the character specified
in clause (4) of Section 5.01 with respect to Securities of such series, no
such notice to Holders shall be given until at least 60 days after the
occurrence thereof.

     Section 6.03. Certain Rights of Trustee.

     Subject to the provisions of Section 6.01:

	(1)	 	the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, coupon, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
	 
	(2)	 	any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
	 
	(3)	 	whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in
the absence of bad faith on its part, rely upon an Officers’
Certificate;

29

 

	(4)	 	the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
	 
	(5)	 	the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or
direction;
	 
	(6)	 	the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
personally or by agent or attorney;
	 
	(7)	 	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, except for any Affiliates of the Trustee,
the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder;
	 
	(8)	 	the Trustee shall not be charged with knowledge of any
Default or Event of Default with respect to the Securities of any
series for which it is acting as Trustee unless either (1) a
Responsible Officer shall have actual knowledge of such Default or
Event of Default or (2) written notice of such Default or Event of Default shall have been given to the Trustee by
the Company or any other obligor on such Securities or by any
Holder of such Securities; and
	 
	(9)	 	the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred
upon it by this Indenture.

     Section 6.04. Not Responsible for Recitals or Issuance of Securities.

     The recitals contained herein and in the Securities, except the Trustee’s
certificates of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.

     Section 6.05. May Hold Securities.

     The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.08 and 6.13, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Security Registrar or such other agent.

     Section 6.06. Money Held in Trust.

     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
otherwise agreed in writing with the Company.

     Section 6.07. Compensation and Reimbursement.

30

 

     The Company agrees:

	(1)	 	to pay to the Trustee from time to time such compensation as
shall be agreed upon in writing from time to time for all services
rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of
an express trust);
	 
	(2)	 	except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the reasonable expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence,
willful misconduct or bad faith; and
	 
	(3)	 	to indemnify the Trustee and each of its directors, officers,
employees, agents and/or representatives for, and to hold each of
them harmless against, any and all loss, liability, claim, damage or
expense incurred without negligence, willful misconduct or bad faith
on each of their part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of
any of the Trustees’ powers or duties hereunder.

     As security for the performance of the obligations of the Company under
this Section 6.07, the Trustee shall have a lien prior to the Securities on all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of, premium (if any) or interest on or
any Additional Amounts with respect to particular Securities.

     Any expenses and compensation for any services rendered by the Trustee
after the occurrence of an Event of Default specified in clause (5) or (6) of
Section 5.01 shall constitute expenses and compensation for services of
administration under all applicable federal or state bankruptcy, insolvency,
reorganization or other similar laws.

     The provisions of this Section 6.07 and any lien arising hereunder shall
survive the resignation or removal of the Trustee or the discharge of the
Company’s obligations under this Indenture and the termination of this
Indenture.

     Section 6.08. Disqualification; Conflicting Interests.

     If the Trustee shall have or acquire any conflicting interest within the
meaning of the Trust Indenture Act, it shall either eliminate such conflicting
interest or resign to the extent, in the manner and with the effect, and
subject to the conditions, provided in the Trust Indenture Act and this
Indenture. For purposes of Section 310(b)(1) of the Trust Indenture Act and to
the extent permitted thereby, the Trustee shall not be deemed to have a
conflicting interest by virtue of being a Trustee under (i) this Indenture with
respect to debt Securities of more than one series, or (ii) the Indenture (For
Senior Debt Securities), between the Company and the Trustee, dated as of
                   , 200  .

     Section 6.09. Corporate Trustee Required; Eligibility.

     There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50 million and subject to supervision or examination by federal or
state (or the District of Columbia) authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section 6.09, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.09, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article Six.

31

 

     The Indenture shall always have a Trustee who satisfies the requirements
of Sections 310(a)(1), 310(a)(2) and 310(a)(5) of the Trust Indenture Act.

     Section 6.10. Resignation and Removal; Appointment of Successor.

     (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article Six shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.

     (b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 6.11 shall
not have been delivered to the resigning Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition at the
expense of the Company any court of competent jurisdiction for the appointment
of a successor Trustee with respect to the Securities of such series.

     (c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 6.11 shall not have been delivered to the removed Trustee within 30
days after the receipt of such notice of removal, the removed Trustee may
petition at the expense of the Company any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.

     (d) If at any time:

	(1)	 	the Trustee shall fail to comply with Section 6.08 after
written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months, or
	 
	(2)	 	the Trustee shall cease to be eligible under Section 6.09 and
shall fail to resign after written request therefor by the Company
or by any such Holder of Securities, or
	 
	(3)	 	the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,

then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.

     (e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Securities of any particular series) and such successor
Trustee or Trustees shall comply with the applicable requirements of Section
6.11. If no successor Trustee with respect to the Securities of any series
shall have been so appointed by the Company and accepted appointment in the
manner required by Section 6.11, any Holder who has been a bona fide Holder of
a Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.

     (f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series

32

 

as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.

     Section 6.11. Acceptance of Appointment by Successor.

     (a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder, subject, nevertheless to its
lien, if any, provided for in Section 6.07.

     (b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1)
shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of
that or those series to which the appointment of such successor
Trustee relates, (2) if the retiring Trustee is not retiring with respect
to all Securities, shall contain such provisions as shall be deemed necessary
or desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture, the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee
hereunder with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates.

     (c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
Section 6.11(a) or Section 6.11(b), as the case may be.

     (d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article Six.

     Section 6.12. Merger, Conversion, Consolidation or Succession to
Business.

     Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article Six,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.

     Section 6.13. Preferential Collection of Claims Against Company.

33

 

     If the Trustee shall be or become a creditor of the Company or any other
obligor upon the Securities (other than by reason of a relationship described
in Section 311(b) of the Trust Indenture Act), the Trustee shall be subject to
any and all applicable provisions of the Trust Indenture Act regarding the
collection of claims against the Company or such other obligor.

     Section 6.14. Appointment of Authenticating Agent.

     The Trustee may appoint an Authenticating Agent or Agents that shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption or pursuant to Section 3.06, and Securities so authenticated shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee hereunder. Wherever
reference is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee’s certificate of authentication, such
reference shall be deemed to include authentication and delivery on behalf of
the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, having a
combined capital and surplus of not less than $50 million or equivalent amount
expressed in a foreign currency and subject to supervision or examination
by federal or state (or the District of Columbia) authority or authority of
such country. If such Authenticating Agent publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section 6.14, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section 6.14, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section 6.14.

     Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 6.14, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.

     An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof 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 such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 6.14.

     The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14.

     If an appointment is made pursuant to this Section 6.14, the Securities
may have endorsed thereon, in addition to the Trustee’s certificate of
authentication, an alternate certificate of authentication in the following
form:

     This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.

	 	 	 
	

	 	
 
	

	 	As Trustee

34

 

	 	 	 	 	 
	

	 	By	 	 
	

	 	 	 	
 
	

	 	 	 	As Authenticating Agent
	 
	 	 	 	 
	

	 	By	 	 
	

	 	 	 	
 
	

	 	 	 	Authorized Signatory

     Notwithstanding any provision of this Section 6.14 to the contrary, if at
any time any Authenticating Agent appointed hereunder with respect to any
series of Securities shall not also be acting as the Security Registrar
hereunder with respect to any series of Securities, then, in addition to all
other duties of an Authenticating Agent hereunder, such Authenticating Agent
shall also be obligated: (i) to furnish to the Security Registrar promptly all
information necessary to enable the Security Registrar to maintain at all times
an accurate and current Security Register; and (ii) prior to authenticating any
Security denominated in a foreign currency, to ascertain from the Company the
units of such foreign currency that are required to be determined by the
Company pursuant to Section 3.02.

ARTICLE SEVEN

HOLDER’S LISTS AND REPORTS BY TRUSTEE AND COMPANY

     Section 7.01. Company to Furnish Trustee Names and Addresses of Holders.

     With respect to each series of Securities, the Company will furnish or
cause to be furnished to the Trustee:

	(1)	 	semi-annually, not more than 15 days after each Regular
Record Date relating to that series (or, if there is no Regular
Record Date relating to that series, on January 1 and July 1), a
list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders of that series as of such dates,
and
	 
	(2)	 	at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request,
a list of similar form and content, such list to be dated as of a
date not more than 15 days prior to the time such list is furnished;

provided, that so long as the Trustee is the Security Registrar, the Company
shall not be required to furnish or cause to be furnished such a list to the
Trustee. The Company shall otherwise comply with Section 310(a) of the Trust
Indenture Act.

     Section 7.02. Preservation of Information; Communications to Holders.

     (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of each series contained in the
most recent list furnished to the Trustee as provided in Section 7.01 and the
names and addresses of Holders of each series received by the Trustee in its
capacity as Security Registrar. The Trustee may destroy any list furnished to
it as provided in Section 7.01 upon receipt of a new list so furnished. The
Trustee shall otherwise comply with Section 310(a) of the Trust Indenture Act.

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

     Section 7.03. Reports by Trustee.

     (a) Within 60 days after the end of each year after the execution of this
Indenture, the Trustee shall transmit by mail to Holders a brief report dated
as of the end of such year that complies with Section 313(a) of the

35

 

Trust
Indenture Act. The Trustee shall comply with Section 313(b) of the Trust
Indenture Act. The Trustee shall transmit by mail all reports as required by
Sections 313(c) and 313(d) of the Trust Indenture Act.

     (b) A copy of each report pursuant to Section 7.03(a) shall, at the time
of its transmission to Holders, be filed by the Trustee with each stock
exchange upon which any Securities are listed, with the Commission and with the
Company. The Company will notify the Trustee when any Securities are listed on
any stock exchange.

     Section 7.04. Reports by Company.

     The Company shall file with the Trustee, within 15 days after the Company
is required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended, and shall otherwise comply with Section 314(a) of the
Trust Indenture Act.

     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 EIGHT

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

     Section 8.01. Company May Consolidate, Etc., Only on Certain Terms.

     The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an
entirety to any Person, unless:

	(1)	 	either (a) the Company shall be the continuing corporation or
(b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged, or the Person
which acquires, by sale, lease, conveyance, transfer or other
disposition, all or substantially all of the assets of the Company,
shall be organized and validly existing under the laws of the United
States of America, any political subdivision thereof or any state
thereof or the District of Columbia, and shall expressly assume, by
a supplemental indenture, the due and punctual payment of the
principal of (and premium, if any,) and interest on or any
Additional Amounts with respect to the Securities and the
performance of the Company’s covenants and obligations under this
Indenture and the Securities.
	 
	(2)	 	immediately after giving effect to such transaction, and
treating any Debt that becomes an obligation of the Company or a
Subsidiary of the Company as a result of such transaction as having
been incurred by the Company or such Subsidiary at the time of such
transaction, no Default or Event of Default, shall have happened and
be continuing; and
	 
	(3)	 	the Company has delivered to the Trustee an Officers’
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with this Article
Eight and that all conditions precedent herein provided for relating
to such transaction have been complied with.

     Section 8.02. Successor Person Substituted.

     Upon any consolidation by the Company with or merger by the Company into
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
8.01, the successor Person formed by such consolidation or into which the
Company is merged or to

36

 

which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of such lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.

ARTICLE NINE

SUPPLEMENTAL INDENTURES

     Section 9.01. Supplemental Indentures Without Consent of Holders.

     Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:

	(1)	 	to evidence the succession of another Person to the Company
(or any guarantor of all or any series of Securities) and the
assumption by any such successor of the covenants of the Company (or
any such guarantor) herein and in the Securities; or
	 
	(2)	 	to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for
the benefit of such series), to convey, transfer, assign, mortgage
or pledge any property to or with the Trustee or otherwise secure
any series of the Securities, or to surrender any right or power
herein conferred upon the Company; or
	 
	(3)	 	to add any additional Events of Default with respect to all
or any series of the Securities (and, if such Event of Default is
applicable to less than all series of Securities, specifying the
series to which such Event of Default is applicable); or
	 
	(4)	 	to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only when there is no Security Outstanding of any series
created prior to the execution of such supplemental indenture which
is adversely affected by such change in or elimination of such
provision; or
	 
	(5)	 	to provide for one or more guarantees of all or any series of
Securities; or
	 
	(6)	 	to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance
and discharge of any series of Securities pursuant to Section 4.01;
provided, however, that any such action shall not adversely affect
the interest of the Holders of Securities of such series or any
other series of Securities in any material respect; or
	 
	(7)	 	to establish the form or terms of Securities of any series as
permitted by Sections 2.01 and 3.01; or
	 
	(8)	 	to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of
one or more series and to add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11(b); or
	 
	(9)	 	to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the
Trust Indenture Act; or
	 
	(10)	 	to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided such
other provisions as may be made

37

 

	 	 	shall not adversely affect the
interests of the Holders of Securities of any series in any material
respect.

     Section 9.02. Supplemental Indentures With Consent of Holders.

     With the consent of the Holders of a majority in principal amount of the
Outstanding Securities of all series affected by such supplemental indenture
(acting as one class), by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however, that no
such supplemental indenture shall, without the consent of all the Holders of
Outstanding Securities whose rights are affected thereby,

	(1)	 	change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce
the principal amount thereof or the rate of interest thereon, any
Additional Amounts with respect thereto or any premium payable upon
the redemption thereof, or change any obligation of the Company to
pay Additional Amounts (except as contemplated by clause (1) of
Section 8.01 and permitted by clause (1) of Section 9.01), or reduce
the amount of the principal of an Original Issue Discount Security
that would be due and payable upon a declaration of acceleration of
the Maturity thereof pursuant to Section 5.02, or change any Place
of Payment where, or the coin or currency or currencies (including
composite currencies) in which, any Security or any premium or any
interest thereon or Additional Amounts with respect thereto is
payable, or impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date), or modify
the provisions of this Indenture with respect to the subordination
of a Security in a manner adverse to the holder thereof,
	 
	(2)	 	reduce the percentage in principal amount of Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
	 
	(3)	 	modify any of the provisions of this Section 9.02, Section
5.13 or Section 10.06, except to increase any such percentage or to
provide with respect to any particular series the right to condition
the effectiveness of any supplemental indenture as to that series on
the consent of the Holders of a specified percentage of the
aggregate principal amount of Outstanding Securities of such series
(which provision may be made pursuant to Section 3.01 without the
consent of any Holder) or to provide that certain other provisions
of this Indenture cannot be modified or waived without the consent
of the Holder of each Outstanding Security affected thereby,
provided, however, that this clause (3) shall not be deemed to
require the consent of any Holder with respect to changes in the
references to “the Trustee” and concomitant changes in this Section
9.02 and Section 10.06, or the deletion of this proviso, in
accordance with the requirements of Section 6.11(b) and clause (7)
of Section 9.01.

A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or that modifies the
rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.

     It shall not be necessary for any Act of Holders under this Section 9.02
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.

     Section 9.03. Execution of Supplemental Indentures.

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     In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article Nine or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 6.01) shall be fully protected in relying
upon an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee’s own rights, duties, immunities or liabilities under this
Indenture or otherwise.

     Section 9.04. Effect of Supplemental Indentures.

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

     Section 9.05. Conformity With Trust Indenture Act.

     Every supplemental indenture executed pursuant to this Article Nine shall
conform to the requirements of the Trust Indenture Act as then in effect.

     Section 9.06. Reference in Securities to Supplemental Indentures.

     Securities of any series authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article Nine may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.

ARTICLE TEN

COVENANTS

     Section 10.01. Payment of Principal, Premium and Interest.

     The Company covenants and agrees for the benefit of the Holders of each
series of Securities that it will duly and punctually pay the principal of,
premium (if any) and interest on and any Additional Amounts with respect to the
Securities of that series in accordance with the terms of the Securities and
this Indenture.

     Section 10.02. Maintenance of Office or Agency.

     The Company will maintain in the Borough of Manhattan, City of New York,
an office or agency (which may be an office of the Trustee, the Registrar or
the Paying Agent) where Securities may be presented or surrendered for payment,
where Securities may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of Securities
and this Indenture may be served. Unless otherwise designated by the Company
by written notice to the Trustee, such office or agency shall be the office of
the agent of the Trustee in the City of New York which, on the date hereof, is
located at                                       , Attention:                   . The Company will give prompt written notice to the Trustee
of the location, and any change in the location, of such office or agency. If
at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
[Corporate Trust Office] of the Trustee and the Company hereby appoints the
Trustee its agent to receive all presentations, surrenders, notices and
demands.

     The Company may also from time to time designate one or more other offices
or agencies (in or outside the City of New York) where the Securities of one or
more series may be presented or surrendered for any or all such purposes and
may from time to time rescind such designations; provided, however, that no
such designation or

39

 

rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, City of
New York, for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.

     Section 10.03. Money for Securities Payments to be Held in Trust.

     If the Company, any Subsidiary or any of their respective Affiliates shall
at any time act as Paying Agent with respect to any series of Securities, such
Paying Agent will, on or before each due date of the principal of, premium (if
any) or interest on or any Additional Amounts with respect to any of the
Securities of that series, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal, premium (if
any) or interest or any Additional Amounts so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided and
will promptly notify the Trustee of its action or failure so to act.

     Whenever the Company shall have one or more Paying Agents for any series
of Securities, the Company will, on or before each due date of the principal
of, premium (if any) or interest on any Securities of that series, deposit with
a Paying Agent a sum sufficient to pay the principal of, premium (if any) or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of
its action or failure so to act.

     The Company will cause each Paying Agent for any series of Securities
other than the Trustee 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 10.03, that such Paying Agent will:

	(1)	 	hold all sums held by it for the payment of the principal of,
premium (if any) or interest on or any Additional Amounts with
respect to Securities of that series in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
	 
	(2)	 	give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of
any payment of principal of, premium (if any) or interest on or any
Additional Amounts with respect to the Securities of that series;
and
	 
	(3)	 	at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.

     The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

     Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium (if any) or
interest on or any Additional Amounts with respect to any Security of any
series and remaining unclaimed for three years after such principal of, premium
(if any) or interest on or any Additional Amounts with respect to any
Securities have become due and payable shall, unless otherwise required by
mandatory provisions of applicable escheat, or abandoned or unclaimed property
law, be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in an Authorized Newspaper
in The Borough of Manhattan, The City of New York and in such other Authorized
Newspapers as the Trustee shall deem appropriate, notice that such money
remains unclaimed and that, after a date specified herein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of

40

 

such money then remaining will, unless otherwise required by mandatory
provisions of applicable escheat, or abandoned or unclaimed property law, be
repaid to the Company.

     Section 10.04. Existence.

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

     Section 10.05. Statement by Officers as to Default.

     The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof so long as any
Security is outstanding hereunder, an Officers’ Certificate, complying with
Section 314(a)(4) of the Trust Indenture Act and stating that a review of the
activities of the Company during such year and of performance under this
Indenture has been made under the supervision of the signers thereof and
whether or not to the best of their knowledge, based upon such review, the
Company is in default in the performance, observance or fulfillment of any of
its covenants and other obligations under this Indenture, and if the Company
shall be in default, specifying each such default known to them and the nature
and status thereof. One of the officers signing the Officers’ Certificate
delivered pursuant to this Section 10.05 shall be the principal executive,
financial or accounting officer of the Company.

     For purposes of this Section 10.05, such compliance shall be determined
without regard to any period of grace or requirement of notice provided under
this Indenture.

     Section 10.06. Waiver of Certain Covenants.

     The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 10.01 through 10.05, inclusive, or
any covenant added for the benefit of any series of Securities as contemplated
by Section 3.01 (unless otherwise specified pursuant to Section 3.01) if before
or after the time for such compliance the Holders of a majority in principal
amount of the Outstanding Securities of all series entitled to the benefit of
such covenant or condition (acting as one class) shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance
with such covenant or condition, but no such waiver shall extend to or affect
such covenant or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such covenant or condition shall remain
in full force and effect.

     Section 10.07. Additional Amounts.

     If the Securities of a series expressly provide for the payment of
Additional Amounts, the Company will pay to the Holder of any Security of such
series Additional Amounts as expressly provided therein. Whenever in this
Indenture there is mentioned, in any context, the payment of the principal of,
or premium (if any) or interest on any Security of any series or the net
proceeds received from the sale or exchange of any Security of any series, such
mention shall be deemed to include mention of the payment of Additional Amounts
provided for in this Section 10.07 to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof pursuant to
the provisions of this Section 10.07 and express mention of the payment of
Additional Amounts (if applicable) in any provisions hereof shall not be
construed as excluding Additional Amounts in those provisions hereof where such
express mention is not made.

     If the Securities of a series provide for the payment of Additional
Amounts, at least 10 days prior to the first Interest Payment Date with respect
to that series of Securities (or if the Securities of that series will not bear
interest prior to Maturity, the first day on which a payment of principal and
any premium is made), and at least 10 days prior to each date of payment of
principal and any premium or interest if there has been any change with respect
to the matters set forth in the below-mentioned Officers’ Certificate, the
Company shall furnish the Trustee and the Company’s principal Paying Agent or
Paying Agents, if other than the Trustee, with an Officers’ Certificate
instructing the Trustee and such Paying Agent or Paying Agents whether such
payment of principal of and any premium or interest on the Securities of that
series shall be made to Holders of Securities of that series who are

41

 

United
States Aliens without withholding for or on account of any tax, assessment or
other governmental charge described in the Securities of that series. If any
such withholding shall be required, then such Officers’ Certificate shall specify by country the amount, if any, required to be withheld on
such payments to such Holders of Securities and the Company will pay to such
Paying Agent the Additional Amounts required by this Section 10.07. The
Company covenants to indemnify the Trustee and any Paying Agent for, and to
hold them harmless against any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by any of them in reliance on any Officers’
Certificate furnished pursuant to this Section 10.07.

ARTICLE ELEVEN

REDEMPTION OF SECURITIES

     Section 11.01. Applicability of Article.

     Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 3.01 for Securities of any series) in
accordance with this Article Eleven.

     Section 11.02. Election to Redeem; Notice to Trustee.

     Unless otherwise provided with respect to the Securities of a series as
contemplated by Section 3.01, the election of the Company to redeem any
Securities shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company of less than all the Securities of any series,
the Company shall, a reasonable period prior to the Redemption Date fixed by
the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities of such series to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, the
Company shall furnish the Trustee with an Officers’ Certificate evidencing
compliance with such restriction.

     Section 11.03. Selection by Trustee of Securities to be Redeemed.

     If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and that may provide for the selection for
redemption of portions (equal to the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series or of the principal
amount of global Securities of such series.

     The Trustee shall promptly notify the Company and the Security Registrar
in writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.

     For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.

     Section 11.04. Notice of Redemption.

     Notice of redemption shall be given in the manner provided in Section 1.07
to each Holder of Securities to be redeemed not less than 30 nor more than 60
days prior to the Redemption Date.

     All notices of redemption shall state:

42

 

	(1)	 	the Redemption Date,
	 
	(2)	 	the Redemption Price,
	 
	(3)	 	if less than all the Outstanding Securities of any series are
to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to
be redeemed,
	 
	(4)	 	that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date,
	 
	(5)	 	the place or places where such Securities are to be
surrendered for payment of the Redemption Price,
	 
	(6)	 	that the redemption is for a sinking fund, if such is the
case, and
	 
	(7)	 	the “CUSIP” number, if applicable.

     A notice of redemption as contemplated by Section 1.07 need not identify
particular Securities to be redeemed. Notice of redemption of Securities to be
redeemed at the election of the Company shall be given by the Company or, at
the Company’s request, by the Trustee in the name and at the expense of the
Company.

     Section 11.05. Deposit of Redemption Price.

     On or before 10:00 a.m., New York City time, on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.03) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, and any Additional Amounts with respect to, all the
Securities which are to be redeemed on that date.

     Section 11.06. Securities Payable on Redemption Date.

     Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest (and any Additional Amounts) to the Redemption Date; provided,
however, that installments of interest whose Stated Maturity is on or prior to
the Redemption Date shall be payable to the Holders of such Securities, or one
or more Predecessor Securities, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of
Section 3.07.

     If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and premium (if any) shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security or, in the case of Original Issue Discount Securities, the
Securities’ Yield to Maturity.

     Section 11.07. Securities Redeemed in Part.

     Any Security that is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and Stated Maturity, of
any

43

 

authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.

     Unless otherwise specified as contemplated by Section 3.01, the Company
and any Affiliate of the Company may at any time purchase or otherwise acquire
Securities in the open market or by private agreement. Such acquisition shall
not operate as or be deemed for any purpose to be a redemption of the
indebtedness represented by such Securities. Any Securities purchased or
acquired by the Company may be delivered to the Trustee and, upon such
delivery, the indebtedness represented thereby shall be deemed to be satisfied.
Section 3.09 shall apply to all Securities so delivered.

ARTICLE TWELVE

SINKING FUNDS

     Section 12.01. Applicability of Article.

     The provisions of this Article Twelve shall be applicable to any sinking
fund for the retirement of Securities of a series except as otherwise specified
as contemplated by Section 3.01 for Securities of such series.

     The minimum amount of any sinking fund payment provided for by the terms
of Securities of any series is herein referred to as a “mandatory sinking fund
payment,” and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an “optional sinking
fund payment”. Unless otherwise provided by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 12.02. Each sinking fund payment shall be applied to
the redemption of Securities of any series as provided for by the terms of
Securities of such series.

     Section 12.02. Satisfaction of Sinking Fund Payments with Securities.

     The Company (1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit Securities
of a series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited.
Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking payment shall be
reduced accordingly.

     Section 12.03. Redemption of Securities for Sinking Fund.

     Not less than 45 days prior (unless a shorter period shall be satisfactory
to the Trustee) to each sinking fund payment date for any series of Securities,
the Company will deliver to the Trustee an Officers’ Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant to the
terms of that series, the portion thereof, if any, which is to be satisfied by
payment of cash and the portion thereof, if any, which is to be satisfied by
delivery of or by crediting Securities of that series pursuant to Section 12.02
and will also deliver to the Trustee any Securities to be so delivered. Not
less than 30 days before each such sinking fund payment date the Trustee shall
select the Securities to be redeemed upon such sinking fund payment date in the
manner specified in Section 11.03 and cause notice of the redemption thereof to
be given in the name of and at the expense of the Company in the manner
provided in Section 11.04. Such notice having been duly given, the redemption
of such Securities shall be made upon the terms and in the manner stated in
Sections 11.06 and 11.07.

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ARTICLE THIRTEEN

SUBORDINATION

     Section 13.01. Securities Subordinated to Senior Indebtedness.

     The Company and each Holder of a Security, by his acceptance thereof,
agree that (a) the payment of the principal of, premium (if any) and interest
on and any Additional Amounts with respect to each and all the Securities and
(b) any other payment in respect of the Securities, including on account of the
acquisition or redemption of Securities by the Company, is subordinated, to the
extent and in the manner provided in such Security or in the supplemental
indenture pursuant to which such Security is issued, to the prior payment in
full of all Senior Indebtedness specified in such Security or in such
supplemental indenture.

     Such subordination provisions shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue
to hold, any of such Senior Indebtedness, and such provisions are made for the
benefit of the holders of such Senior Indebtedness and any one or more of them
may enforce such provisions.

     Section 13.02. Right of Trustee to Hold Senior Indebtedness.

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

     Section 13.03. Subordination Not to Prevent Events of Default.

     The failure to make a payment on account of principal of, premium (if any)
or interest on the Securities by reason of any subordination provision for the
benefit of holders of Senior Indebtedness shall not be construed as preventing
the occurrence of a Default or an Event of Default under Section 5.01 or in any
way prevent the Holders of the Securities from exercising any right hereunder
other than the right to receive payment on the Securities.

     Section 13.04. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.

     The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness, and shall not be liable to any such holders (other than
for its willful misconduct or negligence) if it shall in good faith mistakenly
pay over or distribute to the Holders of the Securities or the Company or any
other Person, cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article Thirteen or otherwise.
Nothing in this Section 13.04 shall affect the obligation of any other such
Person to hold such payment for the benefit of, and to pay such payment over
to, the holders of Senior Indebtedness or their representative.

     Section 13.05. Article Applicable to Paying Agent.

     In case at any time any Payment Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term “Trustee”
as used in this Article Thirteen shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Payment
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article Thirteen in addition to or in place of
the Trustee; provided, however, that this Section 13.13 shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as Paying
Agent.

ARTICLE FOURTEEN

MEETINGS OF HOLDERS OF SECURITIES

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     Section 14.01. Purposes for Which Meetings May Be Called.

     A meeting of Holders of Securities of any or all series may be called at
any time and from time to time pursuant to this Article Thirteen to make, give
or take any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be made, given or taken by
Holders of Securities of such series.

     Section 14.02. Call, Notice and Place of Meetings.

     (a) The Trustee may at any time call a meeting of Holders of Securities of
any series for any purpose specified in Section 14.01, to be held at such time
and at such place in The Borough of Manhattan, The City of New York, or in any
other location as the Trustee shall determine. Notice of every meeting of
Holders of Securities of any series, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be given, in the manner provided in Section 1.07, not less than
20 nor more than 180 days prior to the date fixed for the meeting.

     (b) In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 20% in aggregate principal amount of the Outstanding
Securities of any series, shall have requested the Trustee for any such series
to call a meeting of the Holders of Securities of such series for any purpose
specified in Section 14.01, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall
not have made the first publication of the notice of such meeting within 30
days after receipt of such request or shall not thereafter proceed to cause the
meeting to be held as provided herein, then the Company or the Holders of
Securities of such series in the amount above specified, as the case may be,
may determine the time and the place in Houston, Texas, in The Borough of
Manhattan, The City of New York, or in London, for such meeting and may call
such meeting for such purposes by giving notice thereof as provided in Section
14.02(a).

     Section 14.03. Persons Entitled to Vote at Meetings.

     To be entitled to vote at any meeting of Holders of Securities of any
series, a Person shall be (1) a Holder of one or more Outstanding Securities of
such series, or (2) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more Outstanding Securities of such series by
such Holder or Holders. The only Persons who shall be entitled to be present
or to speak at any meeting of Holders of Securities of any series shall be the
Persons entitled to vote at such meeting and their counsel, any representatives
of the Trustee and its counsel and any representatives of the Company and its
counsel.

     Section 14.04. Quorum; Action.

     The Persons entitled to vote a majority in aggregate principal amount of
the Outstanding Securities of a series shall constitute a quorum for a meeting
of Holders of Securities of such series. In the absence of a quorum within 30
minutes of the time appointed for any such meeting, the meeting shall, if
convened at the request of Holders of Securities of such series, be dissolved.
In any other case, the meeting may be adjourned for a period of not less than
10 days as determined by the chairman of the meeting prior to the adjournment
of such meeting. In the absence of a quorum at any such adjourned meeting,
such adjourned meeting may be further adjourned for a period of not less than
10 days as determined by the chairman of the meeting prior to the adjournment
of such adjourned meeting. Subject to Section 14.05(d), notice of the
reconvening of any adjourned meeting shall be given as provided in Section
14.02(a), except that such notice need be given only once not less than five
days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly that
Persons entitled to vote a majority in principal amount of the Outstanding
Securities of such series shall constitute a quorum.

     Except as limited by the proviso to Section 9.02, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of that
series; provided, however, that, except as limited by the proviso to Section
9.02, any resolution with respect to any request, demand, authorization,
direction, notice, consent or waiver which this Indenture expressly provides
may be made, given or taken by the Holders of a specified percentage that is
less than a majority in aggregate principal amount of the

46

 

Outstanding
Securities of a series may be adopted at a meeting or an adjourned meeting duly
reconvened and at which a quorum is present as aforesaid by the affirmative
vote of the Holders of such specified percentage in aggregate principal amount
of the Outstanding Securities of that series.

     Except as limited by the proviso to Section 9.02, any resolution passed or
decision taken at any meeting of Holders of Securities of any series duly held
in accordance with this Section 14.04 shall be binding on all the Holders of
Securities of such series, whether or not present or represented at the
meeting.

     Section 14.05. Determination of Voting Rights; Conduct and Adjournment of
Meetings.

     (a) The holding of Securities shall be proved in the manner specified in
Section 1.05 and the appointment of any proxy shall be proved in the manner
specified in Section 1.05. Such regulations may provide that written
instruments appointing proxies, regular on their face, may be presumed valid
and genuine without the proof specified in Section 1.05 or other proof.

     (b) 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 Holders of Securities as provided in Section 14.02(b), in which
case the Company or the Holders of Securities of the series calling the
meeting, as the case may be, shall appoint a temporary chairman. A permanent
chairman and a permanent secretary of the meeting shall be elected by vote of
the Persons entitled to vote a majority in aggregate principal amount of the
Outstanding Securities of such series represented at the meeting.

     (c) At any meeting each Holder of a Security of such series and each proxy
shall be entitled to one vote for each $1,000 principal amount of the
Outstanding Securities of such series held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Security 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, except as a Holder of a Security of such series or as a proxy.

     (d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 14.02 at which a quorum is present may be adjourned from
time to time by Persons entitled to vote a majority in aggregate principal
amount of the Outstanding Securities of such series represented at the meeting;
and the meeting may be held as so adjourned without further notice.

     Section 14.06. Counting Votes and Recording Action of Meetings.

     The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities of such series 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, at least in
duplicate, of the proceedings of each meeting of Holders of Securities of any
series shall be prepared by the secretary of the meeting and there shall be
attached to such record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that such notice was given as provided in Section 14.02 and, if
applicable, Section 14.04. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another 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.

* * *

     This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

47

 

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	BRIGHAM EXPLORATION COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	[CORPORATE SEAL]

	 	By	 	 	 	 	 	 
	 	 	 	 	
 
	

	 	 	 	Name:	 	 	 	 
	

	 	 	 	 	 	
 	 	 
	

	 	 	 	Title:	 	 	 	 
	

	 	 	 	 	 	
 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	
 	 	 
	 
	 	 	 	 	 	 	 	 
	[CORPORATE SEAL]

	 	By	 	 	 	 	 	 
	 	 	 	 	
 
	

	 	 	 	Name:	 	 	 	 
	

	 	 	 	 	 	
 	 	 
	

	 	 	 	Title:	 	 	 	 
	

	 	 	 	 	 	
 	 	 

48exv10w1

 

Exhibit 10.1

INVESTMENT MANAGEMENT AGREEMENT

THIS INVESTMENT MANAGEMENT AGREEMENT (this “Agreement”) is entered into
this 8th day of June, 2004 by and between FBR Investment Management, Inc., a
Delaware corporation and registered investment adviser (“Adviser”), and
Aether Systems, Inc., a Delaware corporation (“Client”).

     WHEREAS, Client wishes to employ Adviser to provide certain portfolio
investment management services to Client, including such trading as is
consistent with Client’s Investment Objective and Focus as set forth in
Appendix A, with respect to an investment account (the “Account”)
of Client comprised of residential mortgage-backed securities (“RMBS”),
and Adviser desires to provide such services to Client with respect to the
Account, on the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the promises and mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows.

Section 1. Investment Management Services. Adviser will manage the investment
of securities and cash in Client’s Account on a commercially prudent basis,
subject to the direction of Client and the terms and conditions hereof.
Without limiting the foregoing, Adviser shall perform such services as may be
required from time to time for the management of the Account as Client shall
reasonably request or Adviser deems appropriate under the circumstances,
including, without limitation, the following (collectively, the
“Services”):

     (a) identifying, recommending and implementing investment and funding
criteria and strategies and return and risk management strategies for Account;

     (b) representing Client with mortgage banking parties in connection with
the purchase and commitment to purchase or sell RMBS and implementation of
Client’s leveraging policy;

     (c) monitoring and providing to Client on an ongoing basis price
information and other data obtained from nationally recognized dealers that
maintain markets in RMBS and providing data and advice to Client in connection
with the identification of such dealers;

     (d) managing the day-to-day operations of the Account, to the extent not
performed by the Custodian pursuant to the Trust Agreement, and performing and
supervising the performance of such other administrative functions necessary in
the management of the Account as may be reasonably agreed upon by Adviser and
Client, including the collection of revenues and the payment of debts and
obligations incurred in connection with the Account;

     (e) evaluating, recommending and implementing hedging strategies;

 

 

     (f) taking commercially reasonable actions to ensure that there are
sufficient controls in place at all times to establish and maintain the
completeness and accuracy of Account information;

     (g) providing such information to Client as it may reasonably request in
order for Client to prepare any filing required by the Securities and Exchange
Commission (the “SEC”) or any exchange or quotation system on which
Client’s securities are listed or quoted to be filed by Client;

     (h) providing such information that Client may reasonably request to
comply with applicable law, including the Sarbanes-Oxley Act of 2002 and taking
reasonably requested actions necessary for the maintenance of Client’s
exemption under the Investment Company Act of 1940, as amended, and the rules
and regulation thereunder (the “1940 Act”); and

     (i) cooperating
reasonably with consultants, auditors, accountants, attorneys
and other designated representatives of Client in connection with any service
provided hereunder.

Client agrees to inform Adviser promptly in writing of any material changes in
Client’s investment objectives or financial circumstances which may affect the
manner in which Client’s assets should be invested, and this Agreement shall be
amended accordingly. In the event Client notifies Adviser of material changes
to its investment objectives or financial circumstances, Adviser shall have a
reasonable period of time, not to exceed 15 days, in which to advise Client of
the amount of time required to alter the manner in which the Account is
invested and the Services are provided to meet such changed investment
objectives. Client understands that Adviser’s duties as described herein relate
solely to the management of the Account and not to any other aspect of Client’s
business, and Adviser is not responsible for Client’s compliance with any laws
or regulations applicable to Client.

Section 2. Portfolio Management Services. Subject to the direction and
oversight of Client and the guidelines set forth in Appendix A and
Appendix D, Client hereby delegates trading authority over the Account
to Adviser. Client acknowledges and agrees that Adviser will be solely
responsible for the investment and reinvestment of the assets in the Account in
accordance with this Agreement, including without limitation, Appendix A
and Appendix D, each as amended from time to time. Adviser will also be
solely responsible for the execution of securities transactions through brokers
or dealers.

Section 3. Account Reports. Pursuant to an agreement between Client and the
Account’s Custodian (as defined in Section 10(a)) to be agreed upon by client
and the Custodian, Client will receive from the Custodian periodic reports
reflecting transaction dates, costs, and current market value of assets of the
Account. Adviser will provide to Client weekly, monthly, quarterly and annual
written reports based on information obtained from the Custodian, specifying
the amount of assets and liabilities in the Account which consist of whole pool
RMBS interests (“Qualifying Interests”) and non-whole pool RMBS interests, other real estate securities
(“Non-qualifying Interests”) and

2

 

other investments in the Account.
Adviser shall also provide Client such other Account information concerning the
calculation of Fees as set forth in Appendix B as Client may reasonably
request, as well as other information that Client reasonably requests and that
can be obtained without commercially unreasonable efforts. Client understands
the information provided by Adviser will not be prepared in accordance with
generally accepted accounting principles.

Section 4. Adviser Obligations. (a) Adviser shall refrain from any action
which would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the Account or which would otherwise not be
permitted by Client’s governing documents or the terms hereof.

     (b) Adviser shall require each seller or transferor of RMBS to the Account
to make such representations and warranties regarding such mortgage securities
or mortgage loans as may be, in the judgment of Adviser, necessary, advisable
and appropriate. In addition, Adviser shall take such other action as it deems
necessary, advisable or appropriate with regard to the protection of the
Account’s investments.

     (c) Adviser shall operate in compliance with the provisions of the
Investment Advisers Act of 1940, as amended, and the rules and regulations
thereunder (the “Advisers Act”) applicable to the performance of
Adviser’s duties hereunder and shall remain registered under the Advisers Act
at all times during the term of this Agreement.

     (d) Adviser shall operate in compliance with the provisions of the
Commodities Exchange Act, as amended, and the rules and regulations thereunder
(the “Commodities Act”) applicable to the performance of Adviser’s
duties hereunder and shall remain registered as a commodity pool operator under
the Commodities Act at all times during the term of this Agreement.

     (e) Adviser shall maintain appropriate books of account and records
relating to services performed hereunder, and such books of account and records
shall be accessible for inspection by representatives of Client at any time
during normal business hours.

     (f) Upon notice from Client that Client intends to rely on section 3(c)(5)
of the 1940 Act, Adviser shall conduct the investment activities of Client in
such a manner as to establish promptly and maintain Client’s exemption under
section 3(c)(5) of the 1940 Act as provided in Appendix A.

     (g) When executing transactions for the Account and selecting brokers and
dealers, Adviser shall endeavor to obtain commercially reasonable terms, taking
into account the market and price for the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission.

     (h) Adviser shall obtain and maintain a fidelity bond in an amount and
with an insurer that is reasonably acceptable to Client which shall cover,
among other things, losses resulting from the dishonesty or fraudulent acts of Adviser’s
employees. The cost of such bond shall be borne by Adviser.

3

 

Section 5. Adviser Representations and Warranties. (a) Adviser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation, has the corporate power to own its assets and to
transact the business in which it is now engaged and is duly qualified to do
business and is in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business require such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial conditions of Adviser. Adviser does not do
business under any fictitious business name. Adviser is registered as an
investment adviser under the Advisers Act.

     (b) Adviser has the corporate power and authority to execute, deliver and
perform this Agreement and all obligations required hereunder and has taken all
necessary action to authorize this Agreement and the execution, delivery and
performance of this Agreement and all obligations required hereunder. No
consent of any other person, and no license, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority, is required to be obtained by Adviser in
connection with this Agreement or the execution, delivery, performance,
validity or enforceability of this Agreement and all obligations required
hereunder. This Agreement has been, and each instrument or document required
hereunder will be, executed and delivered by a duly authorized agent of
Adviser. This Agreement constitutes, and each instrument or document required
hereunder when executed and delivered hereunder will constitute, the legally
valid and binding obligation of Adviser enforceable against Adviser in
accordance with its terms.

     (c) The execution, delivery and performance of this Agreement and the
documents or instruments required hereunder do not and will not violate any
provision of any existing law or regulation binding on Adviser, or any order,
judgment, award or decree of any court, arbitrator or governmental authority
binding on Adviser, or any securities issued by Adviser or of any mortgage,
indenture, lease, contract or other agreement, instrument or undertaking to
which Adviser is a party or by which Adviser or any of its assets may be bound,
the violation of which would have a material adverse effect on the business
operations, assets or financial condition of Adviser and will not result in, or
require, the creation or imposition of any lien on any of its property assets
or revenues pursuant to the provisions of any such mortgage indenture, lease,
contract or other agreement, instrument or undertaking.

Section 6. Client Representations and Warranties. (a) Client is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation, has the corporate power to own its assets and to
transact the business in which it is now engaged and is duly qualified to do
business and is in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business require such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial conditions of Client. Client does not do business under
any fictitious business name.

4

 

     (b) Client has the corporate power and authority to execute, deliver and
perform this Agreement and all obligations required hereunder and has taken all
necessary action to authorize this Agreement and the execution, delivery and
performance of this Agreement and all obligations required hereunder. No
consent of any other person, and no license, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority, is required to be obtained by Client in
connection with this Agreement or the execution, delivery, performance,
validity or enforceability of this Agreement and all obligations required
hereunder. This Agreement has been, and each instrument or document required
hereunder will be, executed and delivered by a duly authorized agent of Client.
This Agreement constitutes, and each instrument or document required hereunder
when executed and delivered hereunder will constitute, the legally valid and
binding obligation of Client enforceable against Client in accordance with its
terms.

     (c) The execution, delivery and performance of this Agreement and the
documents or instruments required hereunder do not and will not violate any
provision of any existing law or regulation binding on Client, or any order,
judgment, award or decree of any court, arbitrator or governmental authority
binding on Client, or any securities issued by Client or of any mortgage,
indenture, lease, contract or other agreement, instrument or undertaking to
which Client is a party or by which Client or any of its assets may be bound,
the violation of which would have a material adverse effect on the business
operations, assets or financial condition of Client and will not result in, or
require, the creation or imposition of any lien on any of its property assets
or revenues pursuant to the provisions of any such mortgage indenture, lease,
contract or other agreement, instrument or undertaking.

Section 7. Fees. Client shall pay Adviser certain fees for the Services, as
set forth in Appendix B attached hereto. Payment of fees for Services
hereunder shall occur within 15 days of Client’s receipt of Adviser’s written
notice to Client of the calculation of a fee, unless Client objects in writing
within such 15-day period. Adviser and Client shall negotiate in good faith to
resolve any disputes concerning fee calculations.

Section 8. Client Credit Information. Client authorizes Adviser, in its
reasonable discretion, at any time and from time to time, to make or obtain
reports concerning Client’s credit standing and business conduct under the Fair
Credit Reporting Act, as amended. Adviser shall notify Client promptly
following the making or obtaining of any such reports. Client may make a
written request for a description of the nature and scope of the reports made
by Adviser and the same will be provided promptly to Client.

Section 9. Valuation. Pursuant to the agreement between Client and the
Custodian of the Account to be agreed upon by Client and the Custodian, the
Custodian on a periodic basis will value securities in the Account after
obtaining pricing information from an independent pricing service, approved by
Client from time to time, which initially shall be Bear Stearns Pricing Direct.

5

 

Section 10. Brokerage and Custody.

     (a) Unless otherwise directed by Client, Adviser is authorized to select
the brokers or dealers that will execute purchase and sale transactions for the
Account. Client will be responsible for paying all brokerage commissions.
Custody of Account assets will be maintained with an independent custodian (the
“Custodian”). Client will be responsible for entering into a custodian
agreement with the Custodian. Adviser shall not have custody of any assets or
funds in the Account. Client will be solely responsible for paying all fees or
charges of the Custodian. Client will provide, or will direct the Custodian to
provide, to Adviser copies of all periodic statements and other reports for the
Account prepared by the Custodian, as well as access to Account data via
electronic interface. Adviser shall direct all brokers or dealers executing
orders on behalf of the Account to forward confirmations of those transactions
promptly to the Custodian.

     (b) Upon the receipt by Adviser of a written request signed by a duly
authorized officer of Client, requesting Adviser to release to Client money or
other property held by Adviser for the account of Client (taking into account
liabilities under repurchase agreements and collateralized obligations of the
Account), if any, Adviser shall promptly, but in no event later than thirty
(30) days after such request, release such money or other property to Client.

Section 11. Confidentiality. Except as otherwise agreed in writing or as
required by law: (a) Adviser will keep confidential and will not disclose any
information it obtains from time to time in connection with Services rendered
under this Agreement and (b) Client will keep confidential and for Client’s
exclusive use and benefit all investment advice furnished by Adviser.

Section 12. Service to Other Clients. Client acknowledges and agrees that
Adviser will perform advisory services for various clients, and may give advice
and take action with respect to any Client which may differ from the advice
given or the timing or nature of action taken with respect to the Account.
Except as required by applicable law, nothing in this Agreement shall limit or
prevent Adviser or any of its officers, affiliates, or employees from buying,
selling or trading in any security for its own account.

Section13. Risk Acknowledgment.

(a) Adviser does not guarantee: (i) the future performance of the Account; (ii)
any specific level of performance; (iii) the success of any investment decision
or strategy that Adviser may use; or (iv) the success of Adviser’s overall
management of the Account. Client understands that the recommendations made
for Client’s Account by Adviser are subject to various market, currency,
economic and business risks as set forth on Appendix C attached hereto,
and that such recommendations will not always be profitable. Adviser will make
recommendations solely with respect to the assets held in
Client’s Account, and in making recommendations for the Account, Adviser will
not consider any other securities, cash or other investments owned by Client.

6

 

(b) Adviser will not be liable to Client for: (i) any loss that Client may
suffer by reason of any recommendation or investment decision made or other
action taken or omitted in good faith by Adviser; (ii) any loss arising from
Adviser’s adherence to Client’s written or verbal instructions; or (iii) any
act or failure to act by the Custodian, any broker or dealer to which
transactions for the Account are directed, except as otherwise provided by law
and in the case of acts or omissions, errors in judgment or mistakes of law by
Adviser constituting bad faith, willful misconduct, gross negligence or
recklessness. The federal securities laws impose liabilities under certain
circumstances on persons who act in good faith, and therefore nothing in this
Agreement shall waive or limit any rights which Client may have under those
laws.

Section 14. Proxy Voting and Other Legal Actions. Adviser will not vote, or
give any advice about how to vote, proxies for securities held in the Account.
Adviser will not advise Client or act for Client in any legal proceedings,
including bankruptcies, involving securities held or previously held by the
Account or the issuers of these securities.

Section 15. Termination.

     (a) This Agreement will continue in effect until one year from the date
hereof (the “Initial Term”) unless earlier terminated as provided below.

     (b) This Agreement may be terminated at any time prior to the conclusion
of the Initial Term:

	 	(i)	 	by Client, if Adviser breaches a material
provision of this Agreement, upon not less than sixty (60)
days prior written notice to Adviser;
	 
	 	(ii)	 	by Client, for any reason, upon not less than
thirty (30) days prior written notice to Adviser, subject to
Client making the payment described in Section 15(c) below;
or
	 
	 	(iii)	 	by Adviser, if Client breaches a material
provision of this Agreement or changes the investment
strategy of the Account from investing in RMBS and fails to
cure such breach to the reasonable satisfaction of Adviser
within thirty (30) days following Client’s receipt of written
notification of such breach.

     (c) In the event Client terminates this Agreement prior to the end of the
Initial Term for any reason other than provided for in Section 15(b)(i) above,
Client shall pay Adviser a termination fee equal to $500,000 per full calendar
quarter (and a pro-rata portion of $500,000 for any period of time less than a
full calendar quarter) of the period remaining from the beginning of the
effective date of termination of this Agreement through September 30, 2005. For
purposes of this Section 15(c) the first calendar quarter shall begin on July
1, 2004.

     (d) In the event this Agreement is not terminated during the Initial Term,
this Agreement shall continue in effect until terminated by either Client or
Adviser upon not

7

 

less than ninety (90) days prior written notice to the other,
provided, however, that no such notice of termination may be given during the
Initial Term.

     (e) Notwithstanding the foregoing, Adviser agrees that, if requested by
Client, Adviser shall continue to provide Services and this Agreement shall not
terminate until the earlier of (i) such time that Client is able to find a
substitute adviser on terms reasonably comparable to the terms hereof or (ii)
ninety (90) days from the date Adviser specified as the termination date in its
written notice to Client.

     (f) Termination of this Agreement will not affect: (i) the validity of any
action previously taken by Adviser or Client under this Agreement; (ii)
liabilities or obligations arising from transactions initiated before
termination of this Agreement; or (iii) the force and effect of Section 7,
Section 10(b), Section 11, Section 12, Section 15, Section 18, Section 19 and
Section 20. Upon the termination of this Agreement, Adviser will not have any
obligation to recommend or take any action with regard to the securities, cash
or other investments in the Account except with respect to transactions
initiated before termination of this Agreement and shall not be entitled to
compensation for Services, except for compensation accruing prior to the date
of termination, which shall be pro rated to the date of termination consistent
with the terms and conditions hereof.

     (g) In the event this Agreement is terminated for any reason, Adviser
shall use its reasonable best efforts to assist in the transition to Client or
its designee of any activities or obligations which were being performed by
Adviser hereunder. Without limiting the generality of the foregoing, Adviser
shall (i) make its personnel and other resources reasonably available to Client
for a reasonable period of time not to exceed sixty (60) days from the date of
notice of termination and (ii) deliver to Client (A) a full accounting of the
Account, including a statement showing all payments collected and all property
held and (B) all property and documents of Client then in the custody of
Adviser.

Section 16. Client Authority. The person signing this Agreement on behalf of
Client represents that he or she has been authorized to do so by appropriate
corporate action. Client shall inform Adviser of any event which might affect
this authority or the propriety of this Agreement.

Section 17. Binding Agreement; Assignment. This Agreement will bind and be for
the benefit of Client and Adviser and their successors and permitted assigns,
except that this Agreement and none of the rights interests or obligations
hereunder may be assigned (within the meaning of the Advisers Act) by
Client or Adviser without the prior written consent of the other party to this
Agreement; provided, however, Client may assign any or all of its
rights, interests and obligations hereunder to a wholly owned subsidiary of
Client without the prior written consent of Adviser.

Section 18. Governing Law and Dispute Resolution. This Agreement will be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to any conflict or choice of law provisions; provided, however,
that nothing in this Agreement will be construed in any manner inconsistent
with the Advisers Act or any

8

 

rule or order of the SEC under the Advisers Act.
Any controversy or dispute which may arise between the parties hereto
concerning any transaction or the construction, performance or breach of this
Agreement shall be settled by binding arbitration. The award of the
arbitrators shall be final and binding on the parties and judgment upon the
award rendered may be entered into any court having jurisdiction. THE PARTIES
HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY SUCH DISPUTE.

Section 19. Notices. Any notice, advice or report to be given pursuant to this
Agreement shall be in writing and shall be deemed to have been duly given, made
and received (a) when delivered by hand, (b) 1 business day after having been
sent by reputable overnight courier service (charges prepaid), (c) 1 business
day after being sent by facsimile transmission or (d) 4 business days after
being mailed by certified or registered mail, return receipt requested and
postage prepaid, in each case at the address set forth below:

If to Adviser:

FBR Investment Management, Inc.

1001 Nineteenth Street North

Arlington, VA 22209

Attn: Neal Wilson

Facsimile: (703) 312-9501

With a copy to:

William Ginivan, Chief Legal Officer

Friedman, Billings, Ramsey Group, Inc.

1001 Nineteenth Street North

Arlington, VA 22209

Facsimile: (703)469-1140

If to Client:

Aether Systems, Inc.

11500 Cronridge Dr., Suite 110

Owings Mills, Maryland 21117

Attn: Chief Financial Officer

Facsimile: (410) 356-8699

With a copy to:

Kirkland & Ellis LLP

655 15th Street, N.W., Suite 1200

Washington, D.C. 20005

9

 

Attn: Mark D. Director, Esq.

Facsimile: (202) 879-5200

Section 20. Miscellaneous. If any provision of this Agreement is or should
become inconsistent with any law or rule of any governmental or regulatory body
having jurisdiction over the subject matter of this Agreement, the provision
will be deemed to be rescinded or modified in accordance with any such law or
rule. All other provisions of this Agreement will continue and remain in full
force and effect. No terms or provision of this Agreement may be waived or
changed unless in a writing signed by the party against whom such waiver or
change is sought to be enforced, except as otherwise permitted by this
Agreement and that Client shall be permitted to change or amend Appendix
A or Appendix D without the prior consent of Adviser, provided that
Adviser receives written notification prior to such change or amendment.
Client’s or Adviser’s failure to insist at any time upon strict compliance with
this Agreement or with any of the terms of the Agreement or any continued
course of such conduct on its part will not constitute or be considered a
waiver by Client or Adviser of any of its rights or privileges. This Agreement
contains the entire agreement and understanding between the parties hereto and
supersedes all prior and contemporaneous agreements and understanding
concerning the subject matter of this Agreement. Client and Adviser are not
partners or joint ventures with each other, and nothing in this Agreement shall
be construed to make them such. The Appendices identified in this Agreement
are incorporated herein by this reference and made a part hereof. This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original as against any party whose signature appears thereon, and all of
which shall constitute one and the same instrument.

Section 21. Disclosure. Part II of Adviser’s Form ADV is attached as
Appendix E.

Signature Page Follows

10

 

     IN WITNESS WHEREOF, the parties hereto have caused this Investment and
Trading Management Agreement to be executed by their duly authorized
representatives as of the day and year first written above.

	 	 	 
	

	 	FBR INVESTMENT MANAGEMENT, INC.
	 
	 	 
	

	 	By: /s/ Richard Hendrix
	

	 	
 
	

	 	Name: Richard Hendrix
	

	 	Title: Co-President and Chief Operating Officer
	 
	 	 
	

	 	AETHER SYSTEMS, INC.
	 
	 	 
	

	 	By: /s/ David S. Oros
	

	 	
 
	

	 	Name: David S. Oros
	

	 	Title: Chairman and CEO

 

Appendix A

INVESTMENT OBJECTIVE AND FOCUS

Investment Objective

The investment objective of the Account is to seek a high risk-adjusted return
on capital. There can be no assurance that the Account will achieve its
investment objective or not lose money.

Investment Strategy

Adviser will seek to achieve the Account’s investment objective by investing
exclusively in adjustable-rate RMBS issued by Federal Home Loan Mortgage
Corporation (“FHLMC”), the Federal National Mortgage Association
(“FNMA”) or the Government National Mortgage Association
(“GNMA”). The Account will invest primarily in mortgage-backed
securities that have coupon rates which adjust over time (subject to certain
limitations and lag periods) in conjunction with changes in short-term interest
rates. Those adjustments are based on an objective index, such as LIBOR, the
Treasury Index, or the CD Rate. The Account will finance its investment in
RMBS primarily by entering into reverse repurchase agreements that seek to
enhance the overall performance return on capital invested in the portfolio.

Adviser will employ risk management systems to actively monitor and manage the
Account’s exposure to interest and mortgage prepayments rates, the shape of the
yield curve, credit risk, risk of capital loss, the availability and cost of
financing, and changing yield spreads relating to RMBS. In particular, the
investment strategy will emphasize relative value asset selection, as well as
liability structuring and use of hedging instruments, including futures,
options, swaps, caps and floors, to manage the differential risks inherent in
the Account’s investment strategy. Notwithstanding the foregoing, there can be
no assurance that the Account will achieve its investment objective or be
successful in executing its investment strategy.

Mortgage Assets

The Account will invest in RMBS, issued or guaranteed by FHLMC, FNMA and GNMA,
that represent an ownership interest in a pool of mortgage loans (“Mortgage
Certificates”).

Adviser will acquire RMBS that are consistent with the Account’s risk
management parameters and the terms and conditions of this Agreement and that
Adviser believes can be readily financed. Because the Account will generally
hold its RMBS until maturity, the Account generally will not seek to acquire
assets whose investment returns are only attractive in a limited range of
scenarios. The Account may, however, sell RMBS prior to maturity to meet the
Account liquidity needs, and withdrawals may affect the management of the
Account’s portfolio. Adviser believes that future interest rates and mortgage
prepayment rates are very difficult to predict. Therefore, Adviser seeks to

A-1

 

acquire RMBS for the Account that Adviser believes will provide acceptable
performance returns over a broad range of interest rate and prepayment
scenarios.

The RMBS in which the Account will invest may represent the entire or partial
ownership interest in pools of mortgage loans made by lenders such as savings
and loan institutions, mortgage bankers, and commercial banks. Pools of
mortgage loans are assembled for sale to investors (such as the Account) by
various government, government-related and private organizations. Mortgage
Certificates differ from other forms of traditional debt securities, which
generally provide for periodic payments of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, Mortgage
Certificates provide for a monthly payment that consists of both interest and
principal. In effect, these payments are a “pass-through” of the monthly
interest and principal payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments denied from prepayment of principal resulting
from the sale of the underlying property, refinancing or foreclosure, net of
fees or costs that may be incurred. Some Mortgage Certificates, such as
securities issued by GNMA, are described as “modified pass-through.” These
securities entitle the holder to receive all interest and principal payments
owed on the mortgage pool, net of certain fees, regardless of whether or not
the mortgagors actually make mortgage payments when due.

Upon notice from Client that Client intends to rely on section 3(c)(5) of the
1940 Act, Adviser will at all times ensure that the Account holds not less than
55% of its total assets in Qualifying Interests and not less than 25% of its
total assets in Non-qualifying Interests, except that such latter percentage
may be reduced to the extent that the Account’s investments in Qualifying
Interests exceeds 55%. Adviser shall adjust the percentage of assets invested
in Qualifying Interests and Non-qualifying Interests if so directed by Client.

The investment characteristics of pass-through Mortgage Certificates differ
from traditional fixed-rate income securities. The major differences include
payment of interest and principal on the Mortgage Certificates on a more
frequent schedule, as described above, and the possibility that principal may
be prepaid at any time due to prepayments on the underlying mortgage loans or
other assets. These differences can result in significantly greater price and
yield volatility than is the case with traditional fixed-income securities.

The occurrence of mortgage prepayments is affected by factors including the
level of, and changes in, interest rates, general economic conditions, the
location and age of the mortgage and other social and demographic conditions.
Generally, prepayments on pass-through Mortgage Certificates increase during
periods of falling mortgage interest rates and decrease during periods of
rising mortgage interest rates. Reinvestment of RMBS prepayments may occur at
higher or lower interest rates than the original investment, thus affecting the
yield of the Account’s investments. However, in periods of falling rates,
reinvestment will more likely be at a lower rate.

A-2

 

Leverage through Reverse Repurchase Agreements

Reverse repurchase agreements are agreements that provide for the transfer of
securities from a “Seller” to a “Buyer.” Under each reverse repurchase
agreement, the Seller sells securities to the Buyer at an agreed upon price
(the “Initial Purchase Price”). The Buyer simultaneously agrees to
resell the securities back to the Seller (and the Seller agrees to repurchase)
on a future date for a price equal to the Initial Purchase Price plus an amount
representing a specified return (effectively, interest) to the Issuer to cover
interest cost, fees and expenses. Adviser will cause Account to enter into
reverse repurchase agreements only with counterparties with the highest
available long-term debt rating as determined by at least one of the nationally
recognized rating agencies.

Leverage

The Account will finance the acquisition of RMBS by entering into reverse
repurchase agreements. The effect of these agreements is that the invested
capital of the Account will be leveraged. The assets-to-equity ratio of the
Account’s portfolio of RMBS will generally range from 6.0 to 9.0 times,
although the ratio may vary from time-to-time depending upon market conditions
and other factors Adviser deems relevant, including haircut levels required by
lenders and the market value of the RMBS in the Account’s portfolio. For
purposes of calculating this ratio, the Account’s equity is equal to the value
of the Account’s investment portfolio on a mark-to-market basis less the book
value of the Account’s obligations under repurchase agreements and other
collateralized borrowings.

Adviser’s goal is to strike a balance between the under-utilization of
leverage, which reduces potential returns to investors, and the
over-utilization of leverage, which could reduce the Account’s ability to meet
its obligations during adverse market conditions. The Account’s capital
investment policy limits its ability to acquire additional assets during times
when the Account’s assets-to-equity ratio exceeds 9.0. The Account’s capital
base represents the approximate liquidation value of its investments and
approximates the market value of assets that the Account can pledge or sell to
meet over-collateralization levels for its borrowings. The unpledged portion
of the Account’s capital base is available for the Account to pledge or sell as
necessary to maintain over-collateralization for its borrowings.

A-3

 

Appendix B

FEES

A. Management Fee. Adviser shall receive a management fee (the
“Management Fee”) payable quarterly in arrears at a rate
of 0.0375% multiplied by the Aggregate Cost Basis of the
securities in the Account on the last day of each calendar
quarter; for periods of less than one quarter, the amount shall
be pro-rated to reflect the actual number of days the Account was
managed. 

B. Incentive Fee. Adviser shall receive an incentive fee (the
“Incentive Fee”) payable quarterly in arrears. For each
calendar quarter, the Incentive Fee shall be equal to 25% of the
“Incentive Calculation Amount” for the four quarter period ending
with the end of that calendar quarter. For periods in which this
Agreement has been in effect for less than four quarters, the Net
RMBS Income (Loss), reduced by the Management Fee, shall be
annualized for each such period.

The “Incentive Calculation Amount” per quarter is an
amount equal to 10% of the amount by which the Net RMBS Income
(Loss), reduced by the Management Fee for the applicable quarter,
exceeds 10% per annum of the RMBS Equity Account Statement
Balance at the closing of the last day of the preceding quarter.

The “RMBS Equity Account Statement Balance” shall be equal
to the RMBS Equity Account Statement Balance as of the prior
period plus (1) cash contributions made by Client to the Account
during the quarter plus (2) the Net RMBS Income (Loss) (as
defined below) minus (a) cash distributions from the Account
during the quarter (including distributions to Adviser for the
Management Fee). Adviser shall deliver the RMBS Equity Account
Statement Balance within 15 days of the end of each quarter.

“Net RMBS Income (Loss)” shall be the net interest income
or expense of the Account, including income and expenses related
to hedging instruments, realized gains and losses on the sales of
securities in the Account and the amortization of premiums and
discounts on securities in the Account, in each case determined
on an accrual basis and in accordance with generally accepted
accounting principles as in effect from time to time, for and as
of the end of each quarter. Adviser shall deliver the Net RMBS
Income (Loss) Statement within 15 days of the end of each
quarter.

“Aggregate Cost Basis” shall be the price paid for the
securities multiplied by the month end factor.

The following table illustrates the calculation of the Incentive
Fee.

B-1

 

INCENTIVE FEE CALCULATION

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Q1	 	Q2	 	Q3	 	Q4	 	TOTAL
	Book Value of Equity
	 	$	80,000,000	 	 	$	80,000,000	 	 	$	80,000,000	 	 	$	80,000,000	 	 	$	80,000,000	 
	Annual Hurdle (10% ROE)
	 	$	8,000,000	 	 	$	8,000,000	 	 	$	8,000,000	 	 	$	8,000,000	 	 	$	8,000,000	 
	Net MBS Income
	 	$	3,250,000	 	 	$	3,750,000	 	 	$	4,000,000	 	 	$	4,500,000	 	 	$	15,500,000	 
	Annualized ROE
	 	 	16.3	%	 	 	18.8	%	 	 	20.0	%	 	 	22.5	%	 	 	19.4	%
	Annualized or Prior 4 Quarters Net MBS
Income
	 	$	13,000,000	 	 	$	14,000,000	 	 	$	14,666,667	 	 	$	15,500,000	 	 	 	 	 
	Amount in excess of hurdle
	 	$	5,000,000	 	 	$	6,000,000	 	 	$	6,666,667	 	 	$	7,500,000	 	 	$	7,500,000	 
	Incentive Fee (10.0% of annualized excess)
	 	$	500,000	 	 	$	600,000	 	 	$	666,667	 	 	$	750,000	 	 	 	 	 
	Incentive Fee (10.0% of annualized excess for quarter)
	 	$	125,000	 	 	$	150,000	 	 	$	166,667	 	 	$	187,500	 	 	$	629,167	 

	 	 	 	 	 
	ROE Hurdle
	 	 	10.0
	%
	Incentive Fee % of ROE in Excess of Hurdle
	 	 	10.0
	%

B-2

 

Appendix C

RISK FACTORS

An investment in the Account involves a significant degree of risk which
investors should carefully consider. There is no guarantee of successful
performance, that the objective can be reached or that a positive return can be
achieved or losses avoided. As a general rule, investors can expect that
investments with higher return potential will also have higher potential of
risk or loss of capital or income.

Investors in the Account should consider the following risks, which are
intended to be illustrative but not all-inclusive.

INVESTMENT RISKS

Interest Rate Risk

The Account is subject to several risks associated with changes in interest
rates. An increase in the interest payments on the Account’s borrowings
relative to the interest earned on the Account’s RMBS may adversely affect
profitability. The interest payments on the Account’s borrowings may increase
relative to the interest earned on adjustable-rate RMBS.

Differences in timing of interest rate adjustments on the Account’s RMBS and
the Account’s borrowings (through reverse repurchase agreements) may adversely
affect profitability. The Account will rely primarily on short-term borrowings
to acquire RMBS with long-term maturities. Accordingly, if short-term interest
rates increase, this may adversely affect profitability.

Most of the RMBS the Account intends to acquire will be adjustable rate RMBS.
This means that their interest rates may vary over time based upon changes in
an objective index, such as:

	•	 	LIBOR. The interest rate that certain major banks in London offer for
deposits in London of U.S. dollars.
	 
	•	 	Treasury Index. A monthly or weekly average yield of benchmark U.S.
Treasury securities, as published by the Federal Reserve Board.
	 
	•	 	CD Rate. The weekly average of secondary market interest rates on
six-month negotiable certificates of deposit, as published by the
Federal Reserve Board.

These indices generally reflect the impact of a movement in short-term interest
rates. The interest rates on the Account’s borrowings similarly vary with
changes in an objective index. Nevertheless, the interest rates on the
Account’s borrowings will generally adjust more frequently than the interest
rates on the Account’s adjustable-rate RMBS.

All of the Account’s investments are intended to consist of adjustable rate
RMBS. In a period of rising interest rates, interest payments could increase
while the interest earned on fixed-rate

C-1

 

RMBS would not change. This would
adversely affect profitability and the ability of the Account to make
distributions and may result in losses.

The Account’s adjustable rate RMBS are typically subject to periodic and
lifetime interest rate caps. Periodic interest rate caps limit the amount an
interest rate can increase during any given period. Lifetime interest rate
caps limit the amount an interest rate can increase through maturity of an
RMBS. The Account’s borrowings will not be subject to similar restrictions.
Accordingly, in a period of rapidly increasing interest rates, the Account
could experience a decrease in net income or a net loss because the interest
rates on borrowings could increase without limitation while the interest rates
on adjustable-rate RMBS would be limited by caps.

Mortgage-backed Securities

An RMBS is a general obligation of the issuer, which generally is secured by
mortgages or mortgage-backed collateral. RMBS may be issued or guaranteed by
U.S. Government agencies or instrumentalities or by private entities such as
banks, savings and loans, mortgage bankers and other non-governmental issuers.

Faster or slower prepayments than expected on underlying mortgage loans can
dramatically alter the yield to maturity of an RMBS. The value of most RMBS,
like traditional debt securities, tends to vary inversely with changes in
interest rates (i.e., as interest rates increase, the value of such securities
decrease). RMBS, however, may benefit less than traditional debt securities
from declining interest rates because prepayment of mortgages
tends to accelerate during periods of declining interest rates. Prepayments
shorten the life of the security and shorten the time over which the Account
receives income at the higher rate. Additionally, when mortgage loans
underlying RMBS held by the Account are prepaid, the Account then reinvests the
prepaid amounts in other income securities, the yields of which will reflect
interest rates prevailing at the time. Therefore, the Account’s ability to
hold higher-yielding RMBS will be adversely affected by decreasing interest
rates and to the extent that prepayments occur the Account may be forced to
reinvest in securities that have lower yields. Alternatively, during periods
of rising interest rates, RMBS are often more susceptible to extension risk
than traditional debt securities (i.e., rising interest rates could cause
property owners to prepay their mortgages more slowly than expected when the
security was purchased by the Account which may further reduce the market value
of such security and lengthen the duration of the security).

RMBS are not traded on an organized exchange and may, therefore, be difficult
to value.

Decline in Market Value of Mortgage Assets: Margin Calls and Defaults

The Account will pledge its RMBS to secure funding for its investment strategy.
A decline in market value of pledged RMBS may limit the Account’s ability to
borrow or result in lenders initiating margin calls (i.e. requiring pledge of
cash or additional RMBS to re-establish the ratio of amount of borrowing to the
value of the collateral). This remains true despite effective hedging against
such fluctuations as the hedging instruments may not be part of the collateral
securing the collateralized borrowings. The Account may be required to sell
RMBS under adverse market conditions in order to maintain liquidity. Such
sales may be effected by the Account when deemed necessary in order to preserve
the capital base of the Account. If these

C-2

 

sales were made at prices lower than
the amortized cost of the RMBS, the Account would experience losses. A default
by the Account under its collateralized borrowings could also result in a
liquidation of the collateral and a resulting loss of the difference between
the value of the collateral and the amount borrowed.

Reverse Repurchase Agreements

Reverse repurchase agreements involve the risk that the market value of the
securities retained by the Account may decline below the price of the
securities the Account has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, the Account’s use of the
proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, of whether to enforce the Account’s
obligation to repurchase the securities. Leverage may increase losses.

Prepayment Rates

The RMBS acquired by the Account are backed by pools of mortgage loans. The
Account receives payments, generally, from the payments that are made on
underlying mortgage loans. When borrowers prepay their mortgage loans at rates
that are faster than expected, the result is prepayments are faster than
expected on the RMBS. These faster-than-expected prepayments on the RMBS may
adversely affect the Account’s profitability.

The Account may purchase RMBS that have a higher interest rate than the market
interest rate at the time. In exchange for this higher interest rate, a
premium over the market value must be paid to acquire the security. In
accordance with accounting rules, this premium is amortized over the term of
the RMBS. If the RMBS is prepaid in whole or in part prior to its maturity date
the premium that was prepaid at the time of the prepayment must be expensed.
This could adversely affect the Account’s profitability.

Prepayment rates generally increase when interest rates fall and decrease when
interest rates rise, but changes in prepayment rates are difficult to predict.
Prepayment rates also may be affected by conditions in the housing and
financial markets, general economic conditions and the relative interest rates
on fixed-rate and adjustable-rate mortgage loans.

Adviser may seek to reduce prepayment risk for the Account by acquiring RMBS at
a discount. If a discounted security is prepaid in whole or in part prior to
its maturity date, the Account will earn income equal to the amount of the
remaining discount. This will improve profitability if the discounted
securities are prepaid faster than expected.

While Adviser seeks to manage prepayment risk to the extent practical, in
selecting investments the prepayment risk must be balanced against other risks
and the potential returns of each investment. No strategy can completely
insulate the Account from prepayment risk.

Financing Terms

Since the Account will rely primarily on short-term borrowings, the ability to
achieve the investment objectives of the Account depends not only on the
ability to obtain money in

C-3

 

sufficient amounts and on favorable terms, but also on the ability to renew or
replace on a continuous basis the maturing short-term borrowings. If the
Account is not able to renew or replace maturing borrowings, it may have to
sell assets under possibly adverse market conditions.

Competition for Assets

The Account’s net income depends, in large part, on its ability to acquire
adjustable RMBS at favorable spreads over its financing costs. In acquiring
RMBS, the Account competes with REITs, investment banking firms, savings and
loan associations, banks, insurance companies, mutual funds, other lenders and
other entities that purchase RMBS, many of which have greater financial
resources than the Account. As a result, the Account may not be able to acquire
sufficient RMBS at favorable spreads over its financing costs.

Investment Portfolio Risks

Investments in securities are by their nature speculative. The value of
securities can be affected by economic conditions, trends in business and
finance, national and world affairs and other events and circumstances
affecting the businesses of the issuers of the securities and the markets for
securities.

There can be no assurance that the Account will be successful or profitable, or
will not suffer losses or that the operations and results of the Account will
be similar to or consistent with the historical operations and results of any
business with which Adviser or its related companies have been associated in
the past. The past performance of entities with which Adviser and its related
companies have been associated is not intended to be, and is not to be
considered as, an indication of the likely future performance of the Account.

Securities markets are by nature volatile, and the value of an investment in
the Account may go down as well as up. Investments of the Account may be
illiquid or difficult to value.

Concentration of Account

Because the Account focuses on a single investment strategy, its performance
depends in large part on the performance of that strategy. As a result, the
value of the Account’s investment may fluctuate more widely than it would in a
fund that is diversified across investment strategies.

Changes in interest rates could negatively affect the value of the Account’s
mortgage loans and RMBS

Under a normal yield curve, an investment in RMBS will decline in value if
long-term interest rates increase. Although Fannie Mae, Freddie Mac, or Ginnie
Mae may guarantee payments on the RMBS the Account owns directly, those
guarantees do not protect the Account from declines in market value caused by
changes in interest rates.

A significant risk associated with a portfolio of RMBS is the risk that both
long-term and short-term interest rates will increase significantly. If
long-term rates were to increase significantly, the market value of its RMBS
would decline and the weighted average life of the investments

C-4

 

would increase. The Account could realize a loss if the securities were sold.
At the same time, an increase in short-term interest rates would increase the
amount of interest owed on its reverse repurchase agreement borrowings.

An increase in the Account’s borrowing costs relative to the interest it
receives on its RMBS may adversely affect its profitability

The Account will earn money based upon the spread between the interest payments
it receives on the RMBS investments and the interest payments it must make on
the borrowings. The Account will rely primarily on short-term borrowings of
funds to acquire mortgage-backed securities with long-term maturities. The
interest the Account pays on its borrowings may increase relative to the
interest it earns on its RMBS. If the interest payments on its borrowings
increase relative to the interest it earns on its RMBS, the Account’s
profitability may be adversely affected.

Prepayment rates could negatively affect the value of the Account’s RMBS

Although Fannie Mae, Freddie Mac or Ginnie Mae may guarantee payments on the
RMBS the Account owns directly, those guarantees do not protect investors
against prepayment risks.

Hedging against interest rate exposure may adversely affect the Account’s
earnings

The Account’s hedging activity will vary in scope based on the level and
volatility of interest rates and principal prepayments, the type of RMBS held,
and other changing market conditions. Interest rate hedging may fail to
protect or adversely affect the Account because, among other things:

	•	 	interest rate hedging can be expensive, particularly during periods
of rising and volatile interest rates;
	 
	•	 	available interest rate hedging may not correspond directly with
the interest rate risk for which protection is sought;
	 
	•	 	the duration of the hedge may not match the duration of the related
liability; and
	 
	•	 	the credit quality of the party owing money on the hedge may be
downgraded to such an extent that it impairs its ability to sell or
assign its side of the hedging transaction.

Hedging and Interest Rate Management

The Account may acquire derivative financial instruments to hedge all or a
portion of the interest rate risk associated with its borrowings. The Account
does not intend to acquire derivative instruments for speculative purposes. The
Account’s hedging activities may include entering into interest rate swaps and
caps, options to purchase swaps and caps, and futures and options on futures.

The Account may engage in a variety of interest rate management techniques that
are intended to match the effective maturity of, and the interest received on,
its assets with the effective maturity of, and the interest owed on, its
liabilities. However, Adviser cannot give any assurances that it

C-5

 

can successfully implement its investment and leverage strategies for the
Account. Adviser’s interest rate management techniques may include:

	•	 	puts and calls on securities or indices of securities;
	 
	•	 	Eurodollar futures contracts and options on such contracts;
	 
	•	 	interest rate swaps, which are the exchange of fixed-rate payments
for floating-rate payments; or
	 
	•	 	other similar transactions.

The Account may also use these techniques in an attempt to protect itself
against declines in the market value of its assets that result from general
trends in debt markets. The inability to match closely the maturities and
interest rates, or the inability to protect adequately against declines in the
market value of its assets, could result in losses with respect to its RMBS.

To limit the adverse effect of rising short-term interest rates under its
short-term repurchase agreements, interest rate management techniques do not
eliminate risk. For example, if both long-term and short-term interest rates
were to increase significantly, it could be expected that:

	•	 	the weighted average life of the RMBS would be extended because
prepayments of the underlying mortgage loans would decrease; and
	 
	•	 	the market value of RMBS would decline as long-term interest rates
increased.

Exchange-Traded Futures Contracts and Options on Futures Contracts

The Account may use financial futures contracts and related options to hedge
against changes in the market value of its portfolio securities or securities
that it intends to purchase. The Account’s use of futures contracts and options
on futures contracts will present the same types of volatility and leverage
risks associated with transactions in derivative instruments generally. In
addition, such transactions present a number of risks which might not be
associated with the purchase and sale of other types of investments.

An interest rate futures contract obligates the seller of the contract to
deliver, and the purchaser to take delivery of, the interest rate securities
called for in the contract at a specified future time and at a specified price.
An option on a financial futures contract gives the purchaser the right to
assume a position in the contract (a long position if the option is a call and
short position if the option is a put) at a specified exercise price at any
time during the period of the option. A single stock futures contract or stock
index futures contract obligates the purchaser and seller to deliver, at a
future date specified in the contract, a cash amount equal to a multiple of the
difference between the value of a single stock or a specified stock index on
that date, and the settlement price specified by the contract.

Prior to exercise or expiration, a futures or option position can be terminated
only by entering into an offsetting transaction. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price

C-6

 

exceeds the offsetting purchase price, the seller immediately would be paid the
difference and would realize a gain. If the offsetting purchase price exceeds
the sale price, the seller immediately would pay the difference and would
realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same securities and the same delivery
date. If the offsetting sale price exceeds the purchase price, the purchaser
would realize a gain. If the purchase price exceeds the offsetting sale price,
the purchaser would realize a loss. This risk may be magnified for a single
stock futures transaction, because Adviser must predict the direction of the
price of an individual stock, as opposed to securities prices generally.

The termination of a futures position requires a liquid secondary market on the
exchange on which the original position was established. Adviser intends to
enter into futures and option positions on behalf of the Account only if there
appears to be a liquid secondary market for such instruments, however, there
can be no assurance that such a market will exist for any particular contract
at any point in time. In that event, it might not be possible to establish or
liquidate a position.

The liquidity of a secondary market in futures contracts and options on futures
contracts is also subject to the risk of trading halts, suspensions, exchange
or clearing house equipment failures, government intervention, insolvency of a
brokerage firm, clearing house or exchange or other disruptions of normal
trading activity.

Adviser’s ability to utilize futures or options on futures to hedge the
Account’s exposure to certain positions, or as an alternative to investments in
instruments or markets, will depend on the degree of correlation between the
value of the instrument or market being hedged, or to which exposure is sought,
and the value of the futures or option contract. Because the instrument
underlying a futures contract or option traded by the Account will often be
different from the instrument or market being hedged or to which exposure is
sought, the correlation risk could be significant and could result in
substantial losses to the Account. The use of futures and options involves the
risk that changes in the value of the underlying instrument will not be fully
reflected in the value of the futures contract or option.

Fixed Income Securities

Fixed income securities, including RMBS, are not traded on exchanges. The
over-the-counter market may be illiquid and there may be times when no
counterparty is willing to purchase or sell certain securities. The nature of
the market may make valuations difficult or unreliable.

FHLMC

FHLMC, better known as “Freddie Mac,” is a privately owned government-sponsored
enterprise created pursuant to Title III of the Emergency Home Finance Act of
1970. Freddie Mac’s principal activities currently consist of the purchase of
mortgage loans or participation interests in mortgage loans and the resale of
the loans and participations in the form of guaranteed RMBS. Freddie Mac
guarantees to holders of Freddie Mac certificates, such as the Account, the
timely payment of interest at the applicable pass-through rate and ultimate
collection of all principal on the holder’s pro rata share of the unpaid
principal balance of the underlying mortgage loans, but does not guarantee the
timely payment of scheduled principal on the underlying mortgage loans.

C-7

 

The obligations of Freddie Mac under its guarantees are solely those of Freddie
Mac and are not backed by the full faith and credit of the United States. If
Freddie Mac were unable to satisfy its obligations, the distributions made to
the Account would consist solely of payments and other recoveries on the
underlying mortgage loans, and accordingly, monthly distributions to the
Account would be adversely affected by delinquent payments and defaults on
those mortgage loans. Freddie Mac has a line of credit with the U.S. Treasury,
which has never been drawn upon. FHLMC certificates may pay interest at a
fixed rate or an adjustable rate. The interest rate paid on adjustable-rate
FHLMC certificates (“FHLMC ARMs”) adjusts periodically within 60 days prior to
the month in which the interest rates on the underlying mortgage loans adjust.
The interest rates paid on certificates issued under FHLMC’s standard FHLMC ARM
programs adjust in relation to the Treasury Index. Other specified indices
used in FHLMC ARM programs include the 11th District Cost of Funds Index
published by the Federal Home Loan Bank of San Francisco, LIBOR and other
indices. Interest rates paid on fully indexed FHLMC ARM certificates equal the
applicable index rate plus a specified number of basis points. The majority of
FHLMC ARM certificates issued to date have included pools of mortgage loans
with monthly, semi-annual or annual interest adjustments. Adjustments in the
interest rates paid are generally limited to an annual increase or decrease of
either 100 or 200 basis points and to a lifetime cap of 500 or 600 basis points
over the initial interest rate. Certain FHLMC programs include mortgage loans,
which allow the borrower to convert the adjustable mortgage interest rate to a
fixed rate. Adjustable-rate mortgages which are converted into fixed-rate
mortgage loans are repurchased by the FHLMC or by the seller of the loan to
FHLMC at the unpaid principal balance of the loan plus accrued interest to the
due date of the last adjustable rate interest payment.

FNMA

FNMA, better known as “Fannie Mae,” is a privately owned, federally chartered
corporation organized and existing under the Federal National Mortgage
Association Charter Act. Fannie Mae provides funds to the mortgage market
primarily by purchasing home mortgage loans from local lenders, thereby
replenishing their funds for additional lending. Fannie Mae guarantees to
registered holders of Fannie Mae certificates, such as the Account, that it
will distribute amounts representing scheduled principal and interest (at the
rate provided by the Fannie Mae certificate) on the mortgage loans in the pool
underlying the Fannie Mae certificate, whether or not received, and the full
principal amount of any mortgage loan foreclosed or otherwise finally
liquidated, whether or not the principal amount is actually received. The
obligations of Fannie Mae under its guarantees are solely those of Fannie Mae
and are not backed by the full faith and credit of the United States. If Fannie
Mae were unable to satisfy its obligations, the distributions made to the
Account would consist solely of payments and other recoveries on the underlying
mortgage loans, and accordingly, monthly distributions to the Account would be
adversely affected by delinquent payments and defaults on the mortgage loans.
Fannie Mae has a line of credit with the U.S. Treasury, which has never been
drawn upon. FNMA certificates may pay interest at a fixed rate or an
adjustable rate. Each series of FNMA ARM certificates bears an initial
interest and margin rates tied to an index based on all loans in the related
pool, less a fixed percentage representing servicing compensation and FNMA’s
guarantee fee. The specified index used in different series has included the
Treasury Index, the 11th District Cost of Funds Index published by the Federal
Home Loan Bank of San Francisco, LIBOR and other indices. Interest rates paid
on fully indexed FNMA ARM certificates equal the applicable index rate plus a
specified number of basis points. The majority of series FNMA ARM certificates
issued to date have

C-8

 

evidenced pools of mortgage loans with monthly, semi-annual or annual interest
rate adjustments. Adjustments in the interest rates paid are generally limited
to an annual increase or decrease of either 100 or 200 basis points and to a
lifetime cap of 500 or 600 basis points over the initial interest rate.
Certain FNMA programs include mortgage loans, which allow the borrower to
convert the adjustable mortgage interest rate of the ARM to a fixed rate.
Adjustable-rate mortgages which are converted into fixed-rate mortgage loans
are repurchased by the FNMA or by the seller of the loan to FNMA at the unpaid
principal of the loan plus accrued interest to the due date of the last
adjustable rate interest payment. Adjustments to the interest rates on FNMA
ARM certificates are typically subject to lifetime caps and periodic rate or
payment caps.

GNMA

GNMA, better known as “Ginnie Mae,” is a wholly owned corporate instrumentality
of the United States within the Department of Housing and Urban Development.
Title III of the National Housing Act of 1934 authorizes Ginnie Mae to
guarantee the timely payment of principal and interest on certificates that
represent an interest in a pool of mortgages insured by the Federal Housing
Administration under the Housing Act or partially guaranteed by the Veteran’s
Administration under the Servicemen’s Readjustment Act of 1944 and other loans
eligible for inclusion in mortgage pools underlying Ginnie Mae certificates.
Section 306(g) of the Housing Act provides that “the full faith and credit of
the United States is pledged to the payment of all amounts that may be required
to be paid under any guaranty under this subsection.” An opinion, dated
December 12, 1969, of an Assistant Attorney General of the United States
provides that guarantees under section 306(g) of Ginnie Mae certificates of the
type that the Account may purchase are authorized to be made by Ginnie Mae and
“would constitute general obligations of the United States backed by its full
faith and credit.” The interest rate paid on GNMA certificates may be a fixed
rate or an adjustable rate. The interest rate on GNMA certificates issued
under GNMA’s standard ARM program adjusts annually in relation to the Treasury
Index. Adjustments in the interest rate are generally limited to the annual
increase or decrease of 100 basis points and to a lifetime cap of 500 basis
points over the initial coupon rate.

OTHER RISKS

Past Performance of Adviser

The Account is newly established and has no performance history available to
evaluate its likely future performance. There can be no assurance that the
Account will achieve its investment objective. The past investment performance
of Adviser cannot be construed as an indication of the future results of an
investment in the Account.

The Account’s performance may initially be adversely affected pending the
purchase of securities and the implementation of its investment policies,
particularly in the several-month period following the initial closing, during
which time the Account may not be at its targeted range of leverage.

C-9

 

Reliance on Management Team

The Account’s success depends on the abilities of the Account’s portfolio
manager and his investment team. If Account’s portfolio manager dies or
becomes incapacitated or for any other reason ceases to act in that capacity,
the Account could be adversely affected. The Account is not the beneficiary of
any insurance on the life of the Account’s portfolio manager. The Account’s
portfolio manager will only devote such time and attention to the Account as he
in his discretion deems necessary or appropriate.

Securities Ratings

Investment grade debt ratings are generally assigned to an obligor whose
capacity to meet its financial commitment on the obligation is extremely
strong. Investment grade debt is said to be of the best quality and considered
to carry the smallest degree of investment risk. Non-investment grade debt
ratings denote speculative investments, which are vulnerable to the nonpayment
of interest and risk the inability to repay principal. Ratings are the opinion
of the agency issuing them, are subject to change, and are not a guarantee of
the ability of the issuer to pay.

Conflicts Of Interests

As a diversified asset management, institutional brokerage, securities research
and investment banking firm, Adviser’s parent company, Friedman, Billings,
Ramsey Group, Inc. (“FBR”) engages in a broad spectrum of activities, including
financial advisory, underwriting and brokerage services. Instances may arise
where the interests of one or more Adviser affiliates, customers or clients,
conflict with the interests of the Account. For example, as of December 31,
2003, FBR manages approximately $10 billion of its own assets in an RMBS
portfolio strategy similar to that proposed for the Account. Adviser, or an
affiliated entity, also may manage RMBS portfolio strategies similar to that
proposed for the Account for other asset management clients. The relationships
among the various Adviser affiliates may also give rise to potential conflicts
of interest.

The Account’s portfolio manager will devote a substantial part of his time to
activities other than those of the Account. The Account’s portfolio manager
may provide financial advice and portfolio management services to clients other
than the Account, some of whose objectives may be similar to that of the
Account. For additional information, see Adviser’s Form ADV, Part II. The
Account hereby acknowledges and agrees that (i) Adviser may buy securities from
and sell securities for the account of other clients of Adviser with an
Adviser affiliate acting as broker; (ii) it agrees that any confirmations,
disclosures or notices required by Rule 206(3)-2 to be given to an advisory
client will be given to the Account’s portfolio manager on behalf of the
Account; and (iii) Adviser and its shareholders, including the principals of
Adviser, may receive an indirect benefit from all fees, commissions and other
benefits received by Adviser from the Account or in connection with the
Account’s transactions.

Adviser and its affiliates may provide investment advice with respect to
securities, may directly or indirectly invest in and dispose of securities for
their own account or for other accounts, in which the Account may from time to
time invest, or in which the Account is able to invest or

C-10

 

otherwise have any interest, provided that any investments made by Adviser for
its own account in securities in which the Account invests, and which are made
at the same time as the investment of the Account, shall be made on terms and
conditions no better than those received by the Account and only after the
Account has achieved its desired investment position.

C-11

 

Appendix D

     Adviser must obtain Client’s approval before taking the following actions:

	•	 	Purchasing RMBS individually in an amount exceeding $50 million.
	 
	•	 	Exceeding asset-to-equity ratio of 9:1 or reducing asset-to-equity ratio below 4:1.
	 
	•	 	Purchasing hybrid ARMs greater than 5 years to reset, fixed-rate
RMBS, or RMBS derivatives (e.g., interest-only securities, CMOs with a
weighted-average life of 5 years).
	 
	•	 	Enter into interest rate SWAPS agreements and future contracts.
	 
	•	 	Entering into repurchase agreements with any one counter-party in
an amount that exceeds 35% of outstanding repurchase agreements.

     Adviser must promptly inform Client in writing of the occurrence of any of
the following events:

	•	 	Any material adverse change in credit standing of a repurchase
agreement counterparty, as well as its plan for replacing such
agreements with another counterparty, if necessary.
	 
	•	 	Any material adverse change in collateral terms required by
repurchase agreement counterparties or asset-backed commercial paper.
	 
	•	 	Any material margin calls that a counterparty has requested Adviser
to meet.
	 
	•	 	Any plan to maintain an effective duration between its assets and
liabilities of greater than 2 years, including a rationale for this
recommendation, and a timeframe under which duration will return to
target levels.
	 
	•	 	Any inability to price the RMBS portfolio or significant components
of it for a period exceeding five (5) consecutive trading days or any
inability to obtain month-end or quarter-end prices.
	 
	•	 	Any trades that are not approved on a timely basis.

D-1

 

Appendix E

     Part II of Adviser’s Form ADV is attached.

E-1

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