Document:

EXHIBIT 4.1

 

 

LITHIA MOTORS, INC.

to

 

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

 

 

 

INDENTURE

 

 

Dated as of

 

May 4, 2004

 

 

 

2.875% Convertible
Senior Subordinated Notes Due 2014

 

 

 

TABLE OF CONTENTS

 

 

	
  ARTICLE 1

  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  Section
  1.01.  Definitions

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2

  ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

  	
   

  
	
   

  	
   

  
	
  Section
  2.01.  Designation Amount and Issue of Notes

  	
   

  
	
  Section
  2.02.  Form of Notes

  	
   

  
	
  Section
  2.03.  Date and Denomination of Notes;
  Payments of Interest

  	
   

  
	
  Section
  2.04.  Execution of Notes

  	
   

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

  	
   

  
	
  Section
  2.06.  Mutilated, Destroyed, Lost or Stolen
  Notes

  	
   

  
	
  Section
  2.07.  Temporary Notes

  	
   

  
	
  Section
  2.08.  Cancellation of Notes

  	
   

  
	
  Section
  2.09.  CUSIP Numbers

  	
   

  
	
  Section
  2.10.  Additional Notes

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3

  REDEMPTION AND REPURCHASE OF NOTES

  	
   

  
	
   

  	
   

  
	
  Section
  3.01.  Optional Redemption of Notes

  	
   

  
	
  Section
  3.02.  Notice of Optional Redemption;
  Selection of Notes.

  	
   

  
	
  Section
  3.03.  Payment of Notes Called for
  Redemption by the Company.

  	
   

  
	
  Section
  3.04.  Conversion Arrangement on Call for
  Redemption

  	
   

  
	
  Section
  3.05.  Repurchase at Option of Holders upon
  a Designated Event.

  	
   

  
	
  Section
  3.06.  Repurchase of Notes by the Company at
  Option of Holders.

  	
   

  
	
  Section
  3.07.  Company Repurchase Notice.

  	
   

  
	
  Section
  3.08.  Effect of Designated Event Repurchase
  Notice and Repurchase Notice.

  	
   

  
	
  Section
  3.09.  Deposit of Repurchase Price.

  	
   

  
	
  Section
  3.10.  Notes Repurchased in Part

  	
   

  
	
  Section
  3.11.  Repayment to the Company

  	
   

  
	
   

  	
   

  
	
  ARTICLE 4

  CONTINGENT INTEREST

  	
   

  
	
   

  	
   

  
	
  Section
  4.01.  Contingent Interest.

  	
   

  
	
  Section
  4.02.  Payment of Contingent Interest.

  	
   

  
	
  Section
  4.03.  Contingent Interest Notification.

  	
   

  

 

 

	
  ARTICLE 5

  SUBORDINATION OF NOTES

  	
   

  
	
   

  	
   

  
	
  Section
  5.01.  Agreement of Subordination

  	
   

  
	
  Section
  5.02.  No Payments to Noteholders upon
  Defaults Relating to Designated Senior Indebtedness

  	
   

  
	
  Section
  5.03.  Payments over to Senior Indebtedness
  upon Dissolution

  	
   

  
	
  Section
  5.04.  Prior Payment of Senior Indebtedness
  upon Acceleration of Notes

  	
   

  
	
  Section
  5.05.  Payment over to Senior Indebtedness

  	
   

  
	
  Section
  5.06.  Subrogation

  	
   

  
	
  Section
  5.07.  Payment Obligations Unconditional

  	
   

  
	
  Section
  5.08.  Authorization to Effect Subordination

  	
   

  
	
  Section
  5.09.  Notice to Trustee

  	
   

  
	
  Section
  5.10.  Trustee’s Relation to Senior
  Indebtedness

  	
   

  
	
  Section
  5.11.  No Impairment of Subordination

  	
   

  
	
  Section
  5.12.  Certain Conversions Not Deemed
  Payment

  	
   

  
	
  Section
  5.13.  Article Applicable to Paying Agents

  	
   

  
	
  Section
  5.14.  Senior Indebtedness Entitled to Rely

  	
   

  
	
  Section
  5.15.  Reliance on Judicial Order or
  Certificate of Liquidating Agent

  	
   

  
	
  Section
  5.16.  Anti-Layering Covenant

  	
   

  
	
  Section
  5.17.  Limitation on Liens

  	
   

  
	
   

  	
   

  
	
  ARTICLE 6

  PARTICULAR COVENANTS OF THE COMPANY

  	
   

  
	
   

  	
   

  
	
  Section
  6.01.  Payment of Principal and Interest

  	
   

  
	
  Section
  6.02.  Maintenance of Office or Agency

  	
   

  
	
  Section
  6.03.  Appointments to Fill Vacancies in
  Trustee’s Office

  	
   

  
	
  Section
  6.04.  Provisions as to Paying Agent

  	
   

  
	
  Section
  6.05.  Existence

  	
   

  
	
  Section
  6.06.  Rule 144A Information Requirement

  	
   

  
	
  Section
  6.07.  Stay, Extension and Usury Laws

  	
   

  
	
  Section
  6.08.  Compliance Certificate

  	
   

  
	
  Section
  6.09.  Additional Interest Notice

  	
   

  
	
  Section
  6.10.  Contingent Debt Tax Treatment

  	
   

  
	
  Section
  6.11.  Calculation of Original Issue
  Discount

  	
   

  
	
   

  	
   

  
	
  ARTICLE 7

  NOTEHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

  	
   

  
	
   

  	
   

  
	
  Section
  7.01.  Noteholders’ Lists

  	
   

  
	
  Section
  7.02.  Preservation and Disclosure of Lists

  	
   

  
	
  Section
  7.03.  Reports by Trustee

  	
   

  
	
  Section
  7.04.  Reports by Company

  	
   

  

 

ii

 

	
  ARTICLE 8

  REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT

  	
   

  
	
   

  	
   

  
	
  Section
  8.01.  Events of Default

  	
   

  
	
  Section
  8.02.  Payments of Notes on Default; Suit
  Therefor

  	
   

  
	
  Section
  8.03.  Application of Monies Collected by
  Trustee

  	
   

  
	
  Section
  8.04.  Proceedings by Noteholder

  	
   

  
	
  Section
  8.05.  Proceedings by Trustee

  	
   

  
	
  Section
  8.06.  Remedies Cumulative and Continuing

  	
   

  
	
  Section
  8.07.  Direction of Proceedings and Waiver
  of Defaults by Majority of Noteholders

  	
   

  
	
  Section
  8.08.  Notice of Defaults

  	
   

  
	
  Section
  8.09.  Undertaking to Pay Costs

  	
   

  
	
   

  	
   

  
	
  ARTICLE 9

  THE TRUSTEE

  	
   

  
	
   

  	
   

  
	
  Section
  9.01.  Duties and Responsibilities of
  Trustee

  	
   

  
	
  Section
  9.02.  Reliance on Documents, Opinions, Etc

  	
   

  
	
  Section
  9.03.  No Responsibility for Recitals, Etc

  	
   

  
	
  Section
  9.04.  Trustee, Paying Agents, Conversion
  Agents or Registrar May Own Notes

  	
   

  
	
  Section
  9.05.  Monies to be Held in Trust

  	
   

  
	
  Section
  9.06.  Compensation and Expenses of Trustee

  	
   

  
	
  Section
  9.07.  Officer’s Certificate As Evidence

  	
   

  
	
  Section
  9.08.  Conflicting Interests of Trustee

  	
   

  
	
  Section
  9.09.  Eligibility of Trustee

  	
   

  
	
  Section
  9.10.  Resignation or Removal of Trustee.

  	
   

  
	
  Section
  9.11.  Acceptance by Successor Trustee

  	
   

  
	
  Section
  9.12.  Succession by Merger

  	
   

  
	
  Section
  9.13.  Preferential Collection of Claims

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  10

  THE NOTEHOLDERS

  	
   

  
	
   

  	
   

  
	
  Section
  10.01.  Action by Noteholders

  	
   

  
	
  Section
  10.02.  Proof of Execution by Noteholders

  	
   

  
	
  Section
  10.03.  Who Are Deemed Absolute Owners

  	
   

  
	
  Section
  10.04.  Company-Owned Notes Disregarded

  	
   

  
	
  Section
  10.05.  Revocation of Consents; Future
  Holders Bound

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  11

  MEETINGS OF NOTEHOLDERS

  	
   

  
	
   

  	
   

  
	
  Section
  11.01.  Purpose of Meetings

  	
   

  
	
  Section
  11.02.  Call of Meetings by Trustee

  	
   

  
	
  Section
  11.03.  Call of Meetings by Company or
  Noteholders

  	
   

  

 

iii

 

	
  Section
  11.04.  Qualifications for Voting

  	
   

  
	
  Section
  11.05.  Regulations

  	
   

  
	
  Section
  11.06.  Voting

  	
   

  
	
  Section
  11.07.  No Delay of Rights by Meeting

  	
   

  
	
   

  	
   

  
	
  ARTICLE 12

  SUPPLEMENTAL INDENTURES

  	
   

  
	
   

  	
   

  
	
  Section
  12.01.  Supplemental Indentures Without
  Consent of Noteholders

  	
   

  
	
  Section
  12.02.  Supplemental Indenture With Consent
  of Noteholders

  	
   

  
	
  Section
  12.03.  Effect of Supplemental Indenture

  	
   

  
	
  Section
  12.04.  Notation on Notes

  	
   

  
	
  Section
  12.05.  Evidence of Compliance of
  Supplemental Indenture to Be Furnished to Trustee

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  13

  CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

  	
   

  
	
   

  	
   

  
	
  Section
  13.01.  Company May Consolidate on Certain
  Terms

  	
   

  
	
  Section
  13.02.  Successor to Be Substituted

  	
   

  
	
  Section
  13.03.  Opinion of Counsel to Be Given to
  Trustee

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  14

  SATISFACTION AND DISCHARGE OF INDENTURE

  	
   

  
	
   

  	
   

  
	
  Section
  14.01.  Discharge of Indenture

  	
   

  
	
  Section
  14.02.  Deposited Monies to Be Held in Trust
  by Trustee

  	
   

  
	
  Section
  14.03.  Paying Agent to Repay Monies Held

  	
   

  
	
  Section
  14.04.  Return of Unclaimed Monies

  	
   

  
	
  Section
  14.05.  Reinstatement

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  15

  IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

  	
   

  
	
   

  	
   

  
	
  Section
  15.01.  Indenture and Notes Solely Corporate
  Obligations

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  16

  CONVERSION OF NOTES

  	
   

  
	
   

  	
   

  
	
  Section
  16.01.  Right to Convert.

  	
   

  
	
  Section 16.02.  Exercise of Conversion Privilege; Issuance of Common Stock on
  Conversion; No Adjustment for Interest or Dividends.

  	
   

  
	
  Section
  16.03.  Cash Payments in Lieu of Fractional
  Shares

  	
   

  
	
  Section
  16.04.  Conversion Rate

  	
   

  
	
  Section
  16.05.  Adjustment of Conversion Rate

  	
   

  
	
  Section
  16.06.  Effect of Reclassification,
  Consolidation, Merger or Sale

  	
   

  
	
  Section
  16.07.  Taxes on Shares Issued

  	
   

  

 

iv

 

	
  Section 16.08.  Reservation of Shares; Shares to Be Fully Paid; Compliance with
  Governmental Requirements; Listing of Common Stock

  	
   

  
	
  Section
  16.09.  Responsibility of Trustee

  	
   

  
	
  Section
  16.10.  Notice to Holders Prior to Certain
  Actions

  	
   

  
	
  Section
  16.11.  Stockholder Rights Plans

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  17

  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  
	
  Section
  17.01.  Provisions Binding on Company’s
  Successors

  	
   

  
	
  Section
  17.02.  Official Acts by Successor
  Corporation

  	
   

  
	
  Section
  17.03.  Addresses for Notices, Etc

  	
   

  
	
  Section
  17.04.  Governing Law

  	
   

  
	
  Section
  17.05.  Evidence of Compliance with
  Conditions Precedent; Certificates to Trustee

  	
   

  
	
  Section
  17.06.  Legal Holidays

  	
   

  
	
  Section
  17.07.  Trust Indenture Act

  	
   

  
	
  Section
  17.08.  No Security Interest Created

  	
   

  
	
  Section
  17.09.  Benefits of Indenture

  	
   

  
	
  Section
  17.10.  Table of Contents, Headings, Etc

  	
   

  
	
  Section
  17.11.  Authenticating Agent

  	
   

  
	
  Section
  17.12.  Execution in Counterparts

  	
   

  
	
  Section
  17.13.  Severability

  	
   

  
	
   

  	
   

  
	
  Exhibit A — Form of Note

  	
   

  

 

v

 

INDENTURE

 

INDENTURE
dated as of May 4, 2004 between Lithia Motors, Inc., an Oregon corporation
(hereinafter called the “Company”), having its principal office at
360 East Jackson Street, Medford, Oregon 97501 and U.S. Bank National
Association, a national banking association, and its successors and any
corporation resulting from or surviving any consolidation or merger, organized
under the laws of the United States, as trustee hereunder (hereinafter called
the “Trustee”).

 

WITNESSETH:

 

WHEREAS, for
its lawful corporate purposes, the Company has duly authorized the issue of its
2.875% Convertible Senior Subordinated Notes Due 2014 (hereinafter called the “Notes”),
in an aggregate principal amount not to exceed $85,000,000, or $100,000,000 if
the Initial Purchasers exercise in full their option to purchase additional
Notes under the Purchase Agreement dated as of April 27, 2004 among the Company
and the Initial Purchasers (except pursuant to Sections 2.05, 2.06, 2.10, 3.03,
3.05, 3.06, 3.10 and 16.02 hereof), and to provide the terms and conditions
upon which the Notes are to be authenticated, issued and delivered, the Company
has duly authorized the execution and delivery of this Indenture;

 

WHEREAS, the
Notes, the certificate of authentication to be borne by the Notes, a form of
assignment, a form of option to elect repurchase upon a Designated Event, a
form of repurchase notice and a form of conversion notice to be borne by the
Notes are to be substantially in the forms hereinafter provided for; and

 

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

 

NOW,
THEREFORE, THIS INDENTURE WITNESSETH:

 

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

 

 

ARTICLE 1

DEFINITIONS

 

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

 

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

 

“Additional
Interest Notice” has the meaning specified in Section 6.09.

 

“Adjustment
Event” has the meaning specified in Section 16.05(k).

 

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

 

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

 

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

 

“Business Day”
means any day except a Saturday, Sunday or legal holiday on which banking
institutions in The City of New York or the city in which the Corporate Trust
Office is located are authorized or obligated by law, regulation or executive
order to close.

 

“Closing Sale
Price” of the shares of Common Stock on any date means the closing
sale price per share (or, if no closing sale price is reported, the average of
the closing bid and ask prices or, if more than one in either case, the average
of the average closing bid and the average closing ask prices) on such date as
reported in composite transactions for the principal United States securities

 

2

 

exchange on which shares of Common Stock are
traded or, if the shares of Common Stock are not listed on a United States
national or regional securities exchange, as reported by the Nasdaq National
Market or by the National Quotation Bureau Incorporated.  In the absence of such quotations or
reporting, the Company shall be entitled to determine the Closing Sale Price on
the basis it considers appropriate, and such determination shall be
conclusive.  The Closing Sale Price
shall be determined without reference to extended or after hours trading.

 

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

 

“Common Stock”
means any stock of any class of the Company which has no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which is not subject
to redemption by the Company.  Subject
to the provisions of Section 16.06, however, shares issuable on conversion of
Notes shall include only shares of the class designated as Class A Common
Stock, without par value, of the Company at the date of this Indenture or
shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to
redemption by the Company; provided that if at any time there shall
be more than one such resulting class, the shares of each such class then so
issuable on conversion shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.

 

“Company”
means the corporation named as the “Company” in the first paragraph of this
Indenture, and, subject to the provisions of Article 13 and Section 16.06,
shall include its successors and assigns.

 

“Company
Repurchase Notice” has the meaning specified in Section 3.07(b).

 

“Company
Repurchase Notice Date” has the meaning specified in Section
3.07(b).

 

“Contingent
Interest” has the meaning specified in Section 4.01.

 

“Contingent
Payment Regulations” has the meaning specified in Section 6.10.

 

3

 

“Conversion Date” has the meaning specified
in Section 16.02(b).

 

“Conversion
Notice” has the meaning specified in Section 16.02(a).

 

“Conversion
Price” as of any day will equal $1,000 divided by the Conversion
Rate as of such date.

 

“Conversion
Rate” has the meaning specified in Section 16.04.

 

“Corporate
Trust Office” or other similar term, means the designated office of
the Trustee at which at any particular time its corporate trust business as it
relates to this Indenture shall be administered, which office is, at the date
as of which this Indenture is dated, located at 555 Southwest Oak Street, PL-6,
Portland, Oregon 97204, Telecopier: 503-275-5738, Attention: Corporate Trust
Services.

 

“Credit
Agreement” means the Credit Agreement dated as of February 23, 2003,
among the Company, the various lenders that are party thereto and
DaimlerChrysler Services North America LLC, as amended (and any refunding,
extension or refinancing thereof).

 

“Current
Market Price” has the meaning specified in Section 16.05(g).

 

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

 

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

 

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

 

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

 

 “Designated Event” means the occurrence of
(a) a Fundamental Change or (b) the termination of trading in the Company’s
Common Stock (or other common stock into which the Notes are at such time
convertible) on the New York Stock Exchange, any other United States national
securities exchange or the NASDAQ National Market, following which the
Company’s Common Stock (or other common stock into which the Notes are at such
time convertible) is no longer listed for trading on the New York Stock
Exchange or any other United States national securities exchange or approved
for trading on the NASDAQ National Market or any similar United States system
of automated dissemination of quotations and security prices.

 

4

 

“Designated
Event Expiration Time” has the meaning specified in Section 3.05(b).

 

“Designated
Event Notice” has the meaning specified in Section 3.05(b).

 

“Designated Event Repurchase Date”
has the meaning specified in Section 3.05(a).

 

“Designated
Event Repurchase Notice” has the meaning specified in Section 3.05(a).

 

“Designated
Event Repurchase Price” has the meaning specified in Section
3.05(a).

 

“Designated
Senior Indebtedness” means (1) the Company’s Indebtedness pursuant
to the Credit Agreement and (2) the Company’s financing pursuant to agreements
with Ford Motor Credit Company, General Motors Acceptance Corporation,
DaimlerChrysler Services North America LLC, Toyota Motor Credit Corporation, or
any other bank or asset-based lender pursuant to which the Company or any
Subsidiary incurs Indebtedness all of the net proceeds of which are used to
purchase, finance or refinance vehicles and/or vehicle parts and supplies to be
sold in the ordinary course of business of the Company and its Subsidiaries or
to purchase, finance or refinance service loaner vehicles.  If any payment made to any holder of any
Designated Senior Indebtedness or its Representative with respect to such
Designated Senior Indebtedness is rescinded or must otherwise be returned by
such holder or Representative upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, the reinstated Indebtedness of the Company arising
as a result of such rescission or return shall constitute Designated Senior
Indebtedness effective as of the date of such rescission or return.

 

“Determination
Date” has the meaning specified in Section 16.05(k).

 

“Dividend
Threshold Amount” has the meaning specified in Section 16.05(e).

 

“Event of
Default” means any event specified in Section 8.01 as an Event of
Default.

 

“Ex-Dividend
Date” has the meaning specified in Section 16.05(d).

 

“Ex-Dividend
Time” has the meaning specified in Section 16.01(b).

 

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

 

“Expiration
Time” has the meaning specified in Section 16.05(f).

 

5

 

“Fair Market
Value” has the meaning specified in Section 16.05(g).

 

“Fundamental
Change” means the occurrence of any transaction or event (whether by
means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise) in connection
with which all or substantially all of the Common Stock shall be exchanged for,
converted into, acquired for or constitutes solely the right to receive,
consideration which is not all or substantially all common stock that is (or,
upon consummation of or immediately following such transaction or event, will
be) listed on a United States national securities exchange or approved (or,
upon consummation of or immediately following such transaction or event, will
be approved) for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices.

 

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

 

“Indebtedness”
means, with respect to any Person, and without duplication, whether recourse is
to all or a portion of the assets of such Person and whether or not contingent,
(a) all indebtedness, obligations and other liabilities of such Person for
borrowed money (including obligations of the Person in respect of overdrafts,
foreign exchange contracts, currency exchange agreements, interest rate
protection agreements, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments) or evidenced by bonds, debentures,
notes or similar instruments, other than any account payable, trade payable or
other accrued current liability or obligation incurred in the ordinary course
of business in connection with the obtaining of materials or services; (b) all
reimbursement obligations and other liabilities of such Person with respect to
letters of credit, bank guarantees or bankers’ acceptances; (c) all obligations
and liabilities in respect of leases of such Person required, in conformity
with generally accepted accounting principles, to be accounted for as
capitalized lease obligations on the balance sheet of such Person and all
obligations and other liabilities under any lease or related document
(including a purchase agreement) in connection with the lease of real property
which provides that such Person is contractually obligated to purchase or cause
a third party to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the lessor and the obligations of such
Person under such lease or related document to purchase or to cause a third
party to purchase such leased property; (d) all net obligations of such Person
with respect to an interest rate or other swap, cap or collar agreement or
other similar instrument or agreement or foreign currency hedge, exchange,
purchase or similar instrument or agreement; (e) all direct or indirect
guaranties or similar agreements by such Person in respect of, and obligations
or liabilities of such Person to purchase or otherwise acquire or otherwise
assure a creditor against loss in respect of, indebtedness, obligations or
liabilities of another Person of the kind described in clauses (a) through (d);
(f) any indebtedness or other obligations described in clauses (a) through (e)
secured by any mortgage, pledge, Lien or other encumbrance existing on property
which is owned or held by such Person, regardless of whether the indebtedness
or other

 

6

 

obligation secured thereby shall have been
assumed by such Person; and (g) any and all deferrals, renewals, extensions and
refundings of, or amendments, modifications or supplements to, any indebtedness,
obligation or liability of the kind described in clauses (a) through (f).

 

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

 

“Initial
Purchasers” means

 

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

 

“Junior
Securities” has the meaning specified in Section 5.12.

 

“Lien”
means any mortgage or deed of trust, charge, pledge, lien (statutory or
otherwise), privilege, security interest, assignment, deposit, arrangement,
easement, hypothecation, claim, preference, priority or other encumbrance upon
or with respect to any property of any kind (including any conditional sale,
capital lease or other title retention agreement, any leases in the nature
thereof, and any agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired. A Person will be deemed
to own subject to a Lien any property which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease obligation or other title retention agreement.

 

“Measurement Period” has the meaning
specified in Section 16.01(a).

 

“Non-Electing
Share” has the meaning specified in Section 16.06.

 

“Non-Payment
Default” has the meaning specified in Section 5.02.

 

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

 

“Note
Obligations” means the obligations of the Company under this
Indenture and under the Notes to pay principal of, premium, if any, and interest
when due and payable, and all other amounts due or to become due under or in
connection with this Indenture and the Notes and the performance of all other
obligations to the Trustee and the holders under this Indenture and the Notes
and the Registration Rights Agreement, according to the respective terms hereof
and thereof.

 

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

 

7

 

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

 

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

 

“Officer’s
Certificate”, when used with respect to the Company, means a
certificate signed by any of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President (whether or not designated by a
number or numbers or word or words added before or after the title “Vice
President”), the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company.

 

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

 

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

 

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

 

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

 

(c)           Notes converted into
Common Stock pursuant to Article 16 and Notes deemed not outstanding pursuant
to Article 3.

 

“Payment
Blockage Notice” has the meaning specified in Section 5.02.

 

“Payment
Default” has the meaning specified in Section 5.02.

 

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

 

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

 

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

 

8

 

destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note that it
replaces.

 

“Purchase
Agreement” means the Purchase Agreement dated as of April 27, 2004,
among the Company and the Initial Purchasers, as amended from time to time in
accordance with its terms.

 

“Purchased
Shares” has the meaning specified in Section 16.05(f).

 

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

 

“Record Date”
has the meaning specified in Section 16.05(g).

 

“Representative”
means (a) the indenture trustee or other trustee, agent or representative for
holders of Senior Indebtedness or (b) with respect to any Senior Indebtedness
that does not have any such trustee, agent or other representative, (i) in the
case of such Senior Indebtedness issued pursuant to an agreement providing for
voting arrangements as among the holders or owners of such Senior Indebtedness,
any holder or owner of such Senior Indebtedness acting with the consent of the
required persons necessary to bind such holders or owners of such Senior
Indebtedness and (ii) in the case of all other such Senior Indebtedness, the
holder or owner of such Senior Indebtedness.

 

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

 

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

 

“Registration
Rights Agreement” means the Registration Rights Agreement, dated as
of May 4, 2004, among the Company and the Initial Purchasers, as amended from
time to time in accordance with its terms.

 

“Responsible
Officer” shall mean, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant treasurer or trust officer
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 such person’s knowledge of any
familiarity with the particular subject.

 

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

 

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

 

“Securities”
has the meaning specified in Section 16.05(d).

 

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

 

9

 

“Senior
Indebtedness” means (a) the principal of, premium, if any, and
accrued and unpaid interest on (i) the Company’s Indebtedness for money borrowed,
whether outstanding on the date of execution of this Indenture or thereafter
created, incurred or assumed, (ii) guarantees by the Company of Indebtedness
for money borrowed by any other Person, whether outstanding on the date of
execution of this Indenture or thereafter created, incurred or assumed, (iii)
Indebtedness evidenced by notes, debentures, bonds or other instruments of
Indebtedness for the payment of which the Company is responsible or liable, by
guarantees or otherwise, whether outstanding on the date of execution of this
Indenture or thereafter created, incurred or assumed, and (iv) obligations of
the Company under any agreement to lease, or lease of, any real or personal
property, whether outstanding on the date of execution of this Indenture or
thereafter created, incurred or assumed; (b) any other Indebtedness, liability
or obligation, contingent or otherwise, of the Company and any guarantee,
endorsement or other contingent obligation in respect thereof, whether
outstanding on the date of execution of this Indenture or thereafter created,
incurred or assumed; (c) modifications, renewals, extensions and refundings of
any such Indebtedness, liabilities or obligations; and (d) for purposes of
clarification, any Designated Senior Indebtedness; provided that (x) in all
instances, “Senior Indebtedness” shall include, without limitation, interest
accruing after the filing of a petition initiating any proceeding under any
state, federal or foreign bankruptcy or insolvency law, whether or not such interest
is allowed or allowable in such proceeding and (y) “Senior Indebtedness” shall
not include any of the above in which, in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that such
Indebtedness, liabilities or obligations, or such modification, renewal,
extension or refunding thereof, or the Company’s obligations pursuant to such a
guarantee, are not senior in right of payment to the Notes.  If any payment made to any holder of any
Senior Indebtedness or its Representative with respect to such Senior
Indebtedness is rescinded or must otherwise be returned by such holder or
Representative upon the insolvency, bankruptcy or reorganization of the Company
or otherwise, the reinstated Indebtedness of the Company arising as a result of
such rescission or return shall constitute Senior Indebtedness effective as of
the date of such rescission or return.

 

“Significant
Subsidiary” means, as of any date of determination, a Subsidiary of
the Company that would constitute a “significant subsidiary” as such term is
defined under Rule 1-02(w) of Regulation S-X of the Commission as in effect on
the date of this Indenture.

 

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

 

10

 

combination thereof) and (ii) any partnership
(a) the sole general partner or managing general partner of which is such
Person or a subsidiary of such Person or (b) the only general partners of which
are such Person or one or more subsidiaries of such Person (or any combination
thereof).

 

“Tax Original Issue Discount” means the
amount of ordinary interest income on a Note that must be accrued as original
issue discount for United States federal income tax purposes pursuant to United
States Treasury Regulation section 1.1275-4 or any successor provision.

 

“Trading Day”
has the meaning specified in Section 16.05(g).

 

“Trigger
Event” has the meaning specified in Section 16.05(d).

 

“Trust
Indenture Act” means the Trust Indenture Act of 1939, as amended, as
it was in force at the date of this Indenture, except as provided in Sections
12.03;
provided that if the Trust Indenture Act of 1939 is amended after
the date hereof, the term “Trust Indenture Act” shall mean, to the
extent required by such amendment, the Trust Indenture Act of 1939 as so
amended.

 

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

 

11

 

ARTICLE 2

ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

 

Section 2.01.  Designation Amount and Issue of Notes.  The Notes shall be designated as
“2.875%
Convertible Senior Subordinated Notes Due 2014”.  Notes not to exceed the aggregate principal
amount of $85,000,000, or if the Company sells up to an additional $15,000,000
principal amount of its Notes pursuant to the option of the Initial Purchasers
granted pursuant to the Purchase Agreement dated as of April 27, 2004 among the
Company and the Initial Purchasers, limited in aggregate principal amount to
$100,000,000, (except pursuant to Sections 2.05, 2.06, 2.10, 3.03, 3.05, 3.06,
3.10 and 16.02 hereof) upon the execution of this Indenture, or from time to
time thereafter, may be executed by the Company and delivered to the Trustee
for authentication, and the Trustee shall thereupon authenticate and deliver
said Notes to or upon the written order of the Company, signed by its Chairman
of the Board, Chief Executive Officer, President, any Vice President (whether
or not designated by a number or numbers or word or words added before or after
the title “Vice President”), Treasurer, any Assistant Treasurer, the Secretary
or any Assistant Secretary, without any further action by the Company
hereunder.

 

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

 

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

 

12

 

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

 

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

 

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

 

The Person in
whose name any Note (or its Predecessor Note) is registered on the Note
Register at the close of business on any record date with respect to any
Interest payment date shall be entitled to receive the Interest payable on such
Interest payment date, except that the Interest payable upon redemption or
repurchase will be payable to the Person to whom principal is payable pursuant
to such redemption or repurchase, as the case may be (unless the redemption
date or repurchase date, as the case may be, falls after a record date and
prior to the corresponding Interest payment date, in which case accrued and
unpaid Interest to, but excluding, such redemption date or repurchase date
shall be payable on such Interest payment date to the holders of such Notes
registered as such on the applicable record date).  Interest shall be payable at the office of the Company maintained
by the Company for such purposes in the Borough of Manhattan, City of New York,
which shall initially be an office or agency of the Trustee.  The Company shall pay Interest (i) on any
Notes in certificated form by (x) check mailed to the address of the Person
entitled thereto as it appears in the Note

 

13

 

Register (or upon written notice by such
Person, by wire transfer in immediately available funds, if such Person is entitled
to Interest on aggregate principal in excess of $2 million) or (y) by transfer
to an account maintained by such person in the United States or (ii) on any
Global Note by wire transfer of immediately available funds to the account of
the Depositary or its nominee.  The term
“record
date” with respect to any Interest payment date shall mean the April
15 or October 15 preceding the applicable May 1 or November 1 Interest payment
date, respectively.

 

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

 

(1)           The Company may elect
to make payment of any Defaulted Interest to the Persons in whose names the
Notes (or their respective Predecessor Notes) 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 Note and the date of the
proposed payment (which shall be not less than twenty-five (25) days after the
receipt by the Trustee of such notice, unless the Trustee shall consent to an
earlier date), and at the same time the Company shall deposit with the Trustee
an amount of money equal to the aggregate amount to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee for
such deposit on or prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. 
Thereupon the Trustee shall fix a special record date for the payment of
such Defaulted Interest which shall be not more than fifteen (15) days and not
less than ten (10) days prior to the date of the proposed payment, and not less
than ten (10) days after the receipt by the Trustee of the notice of the
proposed payment.  The Trustee shall
promptly notify the Company of such special record date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed,
first-class postage prepaid, to each holder at his address as it appears in the
Note Register, not less than ten (10) days prior to such special record
date.  Notice of the proposed payment of
such Defaulted Interest and the special record date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names the
Notes (or their respective Predecessor Notes) are registered at the close of
business on such special record date and shall no longer be payable pursuant to
the following clause (2) of this Section 2.03.

 

(2)           The Company may make
payment of any Defaulted Interest in any other lawful manner not inconsistent
with the requirements of any securities exchange or automated quotation system
on which the Notes may be listed or

 

14

 

designated for issuance, and upon such notice
as may be required by such exchange or automated quotation system, if, after
notice given by the Company to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed practicable by the Trustee.

 

Section 2.04.  Execution of Notes.  The Notes shall be signed in the
name and on behalf of the Company by the manual or facsimile signature of its
Chairman of the Board, Chief Executive Officer, President or any Vice President
(whether or not designated by a number or numbers or word or words added before
or after the title “Vice President”).  Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.11), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any
purpose.  Such certificate by the
Trustee (or such an authenticating agent) upon any Note executed by the Company
shall be conclusive evidence that the Note so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.

 

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

 

Section 2.05.  Exchange and Registration of Transfer of
Notes; Restrictions on Transfer.  (a)  The Company shall cause to be kept at the
Corporate Trust Office a register (the register maintained in such office and
in any other office or agency of the Company designated pursuant to Section
6.02 being herein sometimes collectively referred to as the “Note
Register”) in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes.  The Note Register
shall be in written form or in any form capable of being converted into written
form within a reasonably prompt period of time.  The Trustee is hereby appointed “Note Registrar” for the
purpose of registering Notes and transfers of Notes as herein provided. The
Company may appoint one or more co-registrars in accordance with Section 6.02.

 

Upon surrender
for registration of transfer of any Note to the Note Registrar or any
co-registrar, and satisfaction of the requirements for such transfer set forth
in this Section 2.05, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a
like aggregate

 

15

 

principal amount and bearing such restrictive
legends as may be required by this Indenture.

 

Notes may be
exchanged for other Notes of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Notes to be exchanged at any
such office or agency maintained by the Company pursuant to Section 6.02.  Whenever any Notes are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Noteholder making the exchange is entitled to
receive bearing registration numbers not contemporaneously outstanding.

 

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

 

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

 

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

 

Neither the Company
nor the Trustee nor any Note Registrar shall be required to exchange or
register a transfer of (a) any Notes or portions thereof surrendered for
conversion pursuant to Article 16, (b) any Notes for a period of fifteen (15)
days next preceding any selection of Notes to be redeemed, (b) any Notes or
portions thereof called for redemption pursuant to Section 3.01 or (c) any
Notes or portions thereof tendered for repurchase (and not withdrawn) pursuant
to Section 3.05 or Section 3.06.

 

Neither the
Company nor the Trustee nor any Note Registrar shall be required to exchange or
register a transfer of (a) any Notes or portions thereof surrendered for
conversion pursuant to Article 16 or (b) any Notes or portions thereof tendered
for repurchase (and not withdrawn) pursuant to Section 3.05(a).

 

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

 

(i)        Each
Global Note authenticated under this Indenture shall be registered in the name
of the Depositary or a nominee thereof and delivered to such Depositary or a
nominee thereof or Custodian therefor,

 

16

 

and each such Global Note shall constitute a
single Note for all purposes of this Indenture.

 

(ii)       Notwithstanding
any other provision in this Indenture, no Global Note may be exchanged in whole
or in part for Notes registered, and no transfer of a Global Note in whole or
in part may be registered, in the name of any Person other than the Depositary
or a nominee thereof unless (A) the Depositary (i) has notified the Company
that it is unwilling or unable to continue as Depositary for such Global Note
and a successor depositary has not been appointed by the Company within ninety
days or (ii) has ceased to be a clearing agency registered under the Exchange Act
or (B) an Event of Default has occurred and is continuing.  Any Global Note exchanged pursuant to clause
(A) or (B) above shall be so exchanged in whole and not in part and any Global
Note exchanged pursuant to clause (C) above may be exchanged in whole or from
time to time in part as directed by the Company.  Any Note issued in exchange for a Global Note or any portion
thereof shall be a Global Note; provided that any such Note so issued
that is registered in the name of a Person other than the Depositary or a
nominee thereof shall not be a Global Note.

 

(iii)      Securities
issued in exchange for a Global Note or any portion thereof pursuant to clause
(ii) above shall be issued in definitive, fully registered form, without
interest coupons, shall have an aggregate principal amount equal to that of
such Global Note or portion thereof to be so exchanged, shall be registered in
such names and be in such authorized denominations as the Depositary shall
designate and shall bear any legends required hereunder.  Any Global Note to be exchanged in whole
shall be surrendered by the Depositary to the Trustee, as Note Registrar.  With regard to any Global Note to be
exchanged in part, either such Global Note shall be so surrendered for exchange
or, if the Trustee is acting as Custodian for the Depositary or its nominee
with respect to such Global Note, the principal amount thereof shall be
reduced, by an amount equal to the portion thereof to be so exchanged, by means
of an appropriate adjustment made on the records of  the Trustee.  Upon any
such surrender or adjustment, the Trustee shall authenticate and make available
for delivery the Note issuable on such exchange to or upon the written order of
the Depositary or an authorized representative thereof.

 

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

 

(v)      Neither
any members of, or participants in, the Depositary (“Agent Members”) nor any other
Persons on whose behalf Agent Members may act shall have any rights under this
Indenture with respect to any Global Note registered in the name of the
Depositary or any

 

17

 

nominee thereof, and the Depositary or such
nominee, as the case may be, may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner and holder of such
Global Note for all purposes whatsoever. 
Notwithstanding the foregoing, nothing herein shall prevent the Company,
the Trustee or any agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished by the Depositary
or such nominee, as the case may be, or impair, as among the Depositary, its
Agent Members and any other Person on whose behalf an Agent Member may act, the
operation of customary practices of such Persons governing the exercise of the
rights of a holder of any Note.

 

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

 

(c)           Every Note that bears or is required under
this Section 2.05(c) to bear the legend set forth in this Section 2.05(c)
(together with any Common Stock issued upon conversion of the Notes and
required to bear the legend set forth in this Section 2.05(c), collectively,
the “Restricted
Securities”) shall be subject to the restrictions on transfer set
forth in this Section 2.05(c) (including those set forth in the legend below)
unless such restrictions on transfer shall be waived by written consent of the
Company, and the holder of each such Restricted Security, by such Noteholder’s
acceptance thereof, agrees to be bound by all such restrictions on transfer.  As used in Sections 2.05(c) and 2.05(d), the
term “transfer”
encompasses any sale, pledge, loan, transfer or other disposition whatsoever of
any Restricted Security or any interest therein.

 

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

 

18

 

force, or unless otherwise agreed by the
Company in writing, with written notice thereof to the Trustee:

 

THE NOTE EVIDENCED HEREBY HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A “QUALIFIED
INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT); (2)
AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE
TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE EXCEPT (A) TO LITHIA MOTORS,
INC., OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND THAT CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(D) ABOVE), IT WILL FURNISH TO U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF
THIS NOTE PURSUANT TO CLAUSE 2(D) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER
RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTION.

 

Any Note (or
security issued in exchange or substitution therefor) as to which such
restrictions on transfer shall have expired in accordance with their terms or
as to conditions for removal of the foregoing legend set forth therein have
been satisfied may, upon surrender of such Note for exchange to the Note

 

19

 

Registrar in accordance with the provisions
of this Section 2.05, be exchanged for a new Note or Notes, of like tenor and
aggregate principal amount, which shall not bear the restrictive legend
required by this Section 2.05(c).  If
the Restricted Security surrendered for exchange is represented by a Global
Note bearing the legend set forth in this Section 2.05(c), the principal amount
of the legended Global Note shall be reduced by the appropriate principal
amount and the principal amount of a Global Note without the legend set forth
in this Section 2.05(c) shall be increased by an equal principal amount.  If a Global Note without the legend set
forth in this Section 2.05(c) is not then outstanding, the Company shall
execute and the Trustee shall authenticate and deliver an unlegended Global
Note to the Depositary.

 

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

 

THE COMMON STOCK EVIDENCED
HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE COMMON STOCK EVIDENCED HEREBY UNDER RULE
144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT
RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO
LITHIA MOTORS, INC., OR TO ANY SUBSIDIARY THEREOF, (B) TO A “QUALIFIED
INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
COMPLIANCE WITH RULE 144A, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT
TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND THAT CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); (2) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE
1(D) ABOVE), IT WILL FURNISH TO COMPUTERSHARE TRUST COMPANY INC., AS TRANSFER
AGENT (OR A SUCCESSOR

 

20

 

TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT
WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON
THE EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO
CLAUSE 1(D) ABOVE OR UPON ANY TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY
AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION).

 

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

 

(e)           Any Note or Common Stock issued upon the
conversion of a Note that, prior to the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), is purchased or owned by the Company or any Affiliate
thereof may not be resold by the Company or such Affiliate unless registered
under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction which results
in such Notes or Common Stock, as the case may be, no longer being “Restricted
Securities” (as defined under Rule 144).

 

(f)            The Trustee shall have no responsibility or
obligation to any Agent Members or any other Person with respect to the
accuracy of the books or records, or the acts or omissions, of the Depositary
or its nominee or of any participant or member thereof, with respect to any
ownership interest in the Notes or with respect to the delivery to any Agent
Member or other Person (other than the Depositary) of any notice (including any
notice of redemption) or the payment of any amount, under or with respect to
such Notes.  All notices and
communications to be given to the Noteholders and all payments to be made to
Noteholders under the Notes shall be given or made only to or upon the order of
the registered Noteholders (which shall be the Depositary or its nominee in the
case of a Global Note).  The rights of
beneficial owners in any Global Note shall be exercised only through the
Depositary subject to the customary procedures of

 

21

 

the Depositary.  The Trustee may rely and shall be fully protected in relying upon
information furnished by the Depositary with respect to its Agent Members.

 

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

 

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

 

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

 

22

 

the applicant shall also furnish to the
Company, the Trustee and, if applicable, any paying agent or conversion agent
evidence to their satisfaction of the destruction, loss or theft of such Note
and of the ownership thereof.

 

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

 

Section 2.07.  Temporary Notes.  Pending the preparation of Notes in certificated form,
the Company may execute and the Trustee or an authenticating agent appointed by
the Trustee shall, upon the written request of the Company, authenticate and
deliver temporary Notes (printed or lithographed).  Temporary Notes shall be issuable in any authorized denomination,
and substantially in the form of the Notes in certificated form, but with such
omissions, insertions and variations as may be appropriate for temporary Notes,
all as may be determined by the Company. 
Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the Notes in certificated form. Without unreasonable delay, the Company will execute
and deliver to the Trustee or such authenticating agent Notes in certificated
form and thereupon any or all temporary Notes may be surrendered in exchange
therefor, at each office or agency maintained by the Company pursuant to
Section 6.02 and the Trustee or such authenticating agent shall authenticate
and make available for delivery in exchange for such temporary Notes an equal
aggregate principal amount of Notes in certificated form.  Such exchange shall be made by the Company
at its own expense and without any charge therefor.  Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits and subject to the same limitations under this
Indenture as Notes in certificated form authenticated and delivered hereunder.

 

Section 2.08.  Cancellation of Notes.  All Notes surrendered for the
purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer shall, if surrendered to the Company or any paying
agent or any Note Registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall
be promptly canceled by it, and no Notes shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Indenture.  The Trustee shall dispose of such canceled

 

23

 

Notes in accordance with its customary
procedures.  If the Company shall
acquire any of the Notes, such acquisition shall not operate as a redemption,
repurchase or satisfaction of the indebtedness represented by such Notes unless
and until the same are delivered to the Trustee for cancellation.

 

Section 2.09.  CUSIP Numbers.  The Company in issuing the Notes may use “CUSIP”
numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP”
numbers in notices of redemption or repurchases as a convenience to
Noteholders;
provided that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Notes or as
contained in any notice of a redemption or repurchase and that reliance may be
placed only on the other identification numbers printed on the Notes, and any
such redemption or repurchase 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.

 

Section 2.10.  Additional Notes.  The Company may, without the consent of the holders,
issue Additional Notes (the “Additional Notes”) under this Indenture with
the same terms and with the same CUSIP numbers as the Notes offered hereby in
an unlimited aggregate principal amount, provided that such Additional Notes
must be part of the same issue as the notes offered hereby for United States
federal income tax purposes.

 

ARTICLE 3

REDEMPTION AND REPURCHASE OF NOTES

 

Section 3.01.  Optional Redemption of Notes.  The Company may not redeem any
Notes prior to May 6, 2009.  At any time
on or after May 6, 2009 and prior to maturity, the Notes may be redeemed at the
option of the Company, in whole or in part, upon notice as set forth in Section
3.02, at a cash redemption price equal to 100% of the principal amount of the
Notes being redeemed, together with accrued and unpaid Interest, if any, to,
but excluding, the date fixed for redemption; provided that if the
redemption date falls after a record date and on or prior to the corresponding
Interest payment date, then accrued and unpaid Interest, if any, to, but
excluding, the date fixed for redemption shall be paid on such Interest payment
date to the holders of record of such Notes on the applicable record date
instead of the holders surrendering such Notes for redemption on such date.

 

Section 3.02.  Notice of Optional Redemption; Selection of
Notes.

 

In case the Company shall desire to exercise the right
to redeem all or, as the case may be, any part of the Notes pursuant to Section
3.01, it shall fix a date for redemption and it or, at its written request
received by the Trustee not fewer than forty-five (45) days prior (or such
shorter period of time as may be acceptable to the Trustee) to the date fixed
for redemption, the Trustee in the

 

24

 

name of and at the
expense of the Company, shall mail or cause to be mailed a notice of such
redemption not fewer than thirty (30) nor more than sixty (60) days prior to
the redemption date to each holder of Notes to be redeemed as a whole or in
part at its last address as the same appears on the Note Register; provided
that if the Company shall give such notice, it shall also give written notice
of the redemption date to the Trustee. 
Such mailing shall be by first class mail.  The notice, if mailed in the manner herein provided, shall be
conclusively presumed to have been duly given, whether or not the holder
receives such notice.  In any case,
failure to give such notice by mail or any defect in the notice to the holder
of any Note designated for redemption as a whole or in part shall not affect
the validity of the proceedings for the redemption of any other Note.  Concurrently with the mailing of any such
notice of redemption, the Company shall issue a press release announcing such
redemption, the form and content of which press release shall be determined by
the Company in its sole discretion.  The
failure to issue any such press release or any defect therein shall not affect
the validity of the redemption notice or any of the proceedings for the
redemption of any Note called for redemption.

 

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

 

On or prior to the redemption date specified in the
notice of redemption given as provided in this Section 3.02, the Company will
deposit with the Trustee or with one or more paying agents (or, if the Company
is acting as its own paying agent, set aside, segregate and hold in trust as
provided in Section 6.04) an amount of money in immediately available funds
sufficient to redeem on the redemption date all the Notes (or portions thereof)
so called for redemption (other than those theretofore surrendered for
conversion into Common Stock) at the appropriate redemption price, together
with accrued Interest to, but excluding, the redemption date; provided
that if such payment is made on the redemption date it must be received by the
Trustee or paying agent, as the case may be, by 11:00 a.m. New York City time
on such date.  The Company shall be entitled
to retain

 

25

 

any interest,
yield or gain on amounts deposited with the Trustee or any paying agent
pursuant to this Section 3.02 in excess of amounts required hereunder to pay
the redemption price and accrued Interest to, but excluding, the redemption
date.  If any Note called for redemption
is converted pursuant hereto prior to such redemption date, any money deposited
with the Trustee or any paying agent or so segregated and held in trust for the
redemption of such Note shall be paid to the Company upon its written request,
or, if then held by the Company, shall be discharged from such trust.  Whenever any Notes are to be redeemed, the
Company will give the Trustee written notice in the form of an Officer’s
Certificate not fewer than forty-five (45) days (or such shorter period of time
as may be acceptable to the Trustee) prior to the redemption date as to the
aggregate principal amount of Notes to be redeemed.

 

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

 

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

 

Section 3.03.  Payment of Notes Called for Redemption by
the Company.

 

If notice of redemption has been given as provided in
Section 3.02, the Notes or portion of Notes with respect to which such notice
has been given shall, unless converted into Common Stock pursuant to the terms
hereof, become due and payable on the date fixed for redemption and at the
place or places stated in such notice at the applicable redemption price, together
with Interest accrued to (but excluding) the redemption date, and on and after
said date (unless the Company shall default in the payment of such Notes at the
redemption price, together with Interest accrued to said date) Interest on the
Notes or portion of Notes so called for redemption shall cease to accrue and,
after the close of business on the second Business Day immediately preceding
the redemption date (unless the Company shall default in the payment of such
Notes at the redemption

 

26

 

price, together
with Interest accrued to said date) such Notes shall cease to be convertible
into Common Stock and, except as provided in Section 9.05 and Section 14.04, to
be entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Notes except the right to
receive the redemption price thereof and unpaid Interest to (but excluding) the
redemption date.  On presentation and
surrender of such Notes at a place of payment in said notice specified, the
said Notes or the specified portions thereof shall be paid and redeemed by the
Company at the applicable redemption price, together with Interest accrued
thereon to, but excluding, the redemption date; provided that if the
redemption date falls after a record date and on or prior the corresponding
Interest payment date, then accrued and unpaid Interest, if any, to, but
excluding, the date fixed for redemption shall be paid on such Interest payment
date to the holders of record of such Notes on the applicable record date
instead of the holders surrendering such Notes for redemption on such date.

 

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

 

Notwithstanding the foregoing, the Trustee shall not
redeem any Notes or mail any notice of redemption during the continuance of a
default in payment of Interest on the Notes. 
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid or duly provided for,
bear interest from the redemption date at a rate equal to 1% per annum plus the
rate borne by the Note and such Note shall remain convertible into Common Stock
until the principal and Interest shall have been paid or duly provided for.

 

Section 3.04.  Conversion Arrangement on Call for
Redemption.  In connection
with any redemption of Notes, the Company may arrange for the purchase and
conversion of any Notes by an agreement with one or more investment banks or
other purchasers to purchase such Notes by paying to the Trustee in trust for
the Noteholders, on or before the date fixed for redemption, an amount not less
than the applicable redemption price, together with Interest accrued to, but
excluding, the date fixed for redemption, of such Notes.  Notwithstanding anything to the contrary
contained in this Article 3, the obligation of the Company to pay the
redemption price of such Notes, together with Interest accrued to, but
excluding, the date fixed for redemption, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers.  If such an agreement is entered into, a copy
of which will be filed with the Trustee prior to the date fixed for redemption,
any Notes not duly surrendered for conversion by the holders thereof may, at
the option of the Company, be deemed, to the fullest extent permitted by law,
acquired by such purchasers from such holders and (notwithstanding anything to
the contrary contained in Article 16) surrendered by such purchasers for
conversion, all as of immediately prior to the close of business on the second
Business Day

 

27

 

immediately preceding the date fixed for
redemption (and the right to convert any such Notes shall be extended through
such time), subject to payment of the above amount as aforesaid.  At the direction of the Company, the Trustee
shall hold and dispose of any such amount paid to it in the same manner as it
would monies deposited with it by the Company for the redemption of Notes.  Without the Trustee’s prior written consent,
no arrangement between the Company and such purchasers for the purchase and
conversion of any Notes shall increase or otherwise affect any of the powers,
duties, responsibilities or obligations of the Trustee as set forth in this
Indenture.

 

Section 3.05.  Repurchase at Option of Holders upon a
Designated Event.

 

(a)           If there shall occur a
Designated Event at any time prior to maturity of the Notes, then each
Noteholder shall have the right, at such holder’s option, to require the
Company to repurchase for cash such holder’s Notes, in whole or any portion
thereof that is a multiple of $1,000 principal amount, on the date (the “Designated
Event Repurchase Date”) that is thirty (30) days after the date of
the Designated Event Notice (as defined in Section 3.05(b)) of such Designated
Event (or, if such 30th day is not a Business Day, the next succeeding Business
Day) at a repurchase price equal to 100% of the principal amount thereof, plus accrued
and unpaid Interest, if any, to, but excluding, the Designated Event Repurchase
Date (the “Designated Event Repurchase Price”); provided that if such
Designated Event Repurchase Date falls after a record date and on or prior to
the corresponding Interest payment date, then accrued and unpaid Interest, if
any, to, but excluding, the Designated Event Repurchase Date shall be paid on
such Interest payment date to the holders of record of the Notes on the
applicable record date instead of the holders surrendering the Notes for
repurchase on such date.  Repurchases of
Notes under this Section 3.05(a) shall be made at the option of the Noteholder,
upon:

 

(i)        delivery
to the Trustee (or other paying agent appointed by the Company) by a Noteholder
of a duly completed notice entitled “Option to Elect Repayment Upon a
Designated Event” (the “Designated Event Repurchase Notice”) in the
form set forth on the reverse of the Note during the period beginning at any
time from the opening of business on the date the Designated Event Notice is
mailed until the close of business on the Designated Event Repurchase Date; and

 

(ii)       delivery
or book-entry transfer of the Note or Notes to the Trustee (or other paying
agent appointed by the Company) at any time after delivery of the Designated
Event Repurchase Notice (together with all necessary endorsements) at the
Corporate Trust Office of the Trustee (or other paying agent appointed by the
Company) in the Borough of Manhattan, The City of New York, as provided in
Section 6.02, such delivery being a condition to receipt by the holder of the
repurchase price therefor; provided that such repurchase price shall
be so paid pursuant to this Section 3.05(a) only if the Note so delivered to
the Trustee (or other

 

28

 

paying agent
appointed by the Company) shall conform in all respects to the description
thereof in the related Designated Event Repurchase Notice.

 

The Company
shall repurchase, pursuant to this Section 3.05(a), a portion of a Note, if the
principal amount of such portion is $1,000 or a multiple of $1,000.  Provisions of this Indenture that apply to
the repurchase of all of a Note also apply to the repurchase of such portion of
such Note.  Upon presentation of any
Note redeemed in part only, the Company shall execute and, upon the Company’s
written direction to the Trustee, the Trustee shall authenticate and make
available for delivery to the holder thereof, at the expense of the Company, a
new Note or Notes, of authorized denominations, in aggregate principal amount
equal to the unredeemed portion of the Notes presented.

 

Notwithstanding
anything herein to the contrary, any holder delivering to the Trustee (or other
paying agent appointed by the Company) the Designated Event Repurchase Notice
contemplated by this Section 3.05(a) shall have the right to withdraw such
Designated Event Repurchase Notice at any time prior to the close of business
on the Designated Event Repurchase Date by delivery of a written notice of
withdrawal to the Trustee (or other paying agent appointed by the Company) in
accordance with Section 3.08.

 

The Trustee
(or other paying agent appointed by the Company) shall promptly notify the
Company of the receipt by it of any Designated Event Repurchase Notice or
written notice of withdrawal thereof.

 

(b)           On or before the tenth
day after the occurrence of any Designated Event of which it is aware, the
Company or, at its written request (which must be received by the Trustee at
least five (5) Business Days prior to the date the Trustee is requested to give
notice as described below, unless the Trustee shall agree in writing to a
shorter period), the Trustee, in the name of and at the expense of the Company,
shall mail or cause to be mailed to all holders of record on the date of the
Designated Event a notice (the “Designated Event Notice”) of the occurrence
of such Designated Event and of the repurchase right at the option of the
holders arising as a result thereof. 
Such notice shall be mailed by first class mail.  The notice, if mailed in the manner herein
provided, shall be conclusively presumed to have been duly given, whether or
not the holder receives such notice.  If
the Company shall give such notice, the Company shall also deliver a copy of
the Designated Event Notice to the Trustee at such time as it is mailed to
Noteholders.  Concurrently with the
mailing of any Designated Event Notice, the Company shall issue a press release
announcing such Designated Event referred to in the Designated Event Notice,
the form and content of which press release shall be determined by the Company
in its sole discretion.  The failure to
issue any such press release or any defect therein shall not affect the
validity of the Designated Event Notice or any proceedings for the repurchase
of any Note which any Noteholder may elect to have the Company repurchase as
provided in this Section 3.05.

 

29

 

Each
Designated Event Notice shall specify the circumstances constituting the Designated
Event, the Designated Event Repurchase Date, the price at which the Company
shall be obligated to repurchase Notes, that the holder must exercise the
repurchase right on or prior to the close of business on the Designated Event
Repurchase Date (the “Designated Event Expiration Time”), that
the holder shall have the right to withdraw any Notes surrendered prior to the
Designated Event Expiration Time, a description of the procedure which a
Noteholder must follow to exercise such repurchase right and to withdraw any
surrendered Notes, the place or places where the holder is to surrender such
holder’s Notes, the amount of Interest accrued on each Note to the Designated
Event Repurchase Date and the CUSIP number or numbers of the Notes (if then
generally in use) and include a form of Designated Event Repurchase Notice.

 

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

 

(c)           A Designated Event
Repurchase Notice may be withdrawn by means of a written notice of withdrawal
delivered to the office of the Trustee (or other paying agent appointed by the
Company) in accordance with the Designated Event Repurchase Notice at any time
prior to the close of business on the Designated Event Repurchase Date,
specifying:

 

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

 

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

 

(iii)      the
principal amount, if any, of such Note which remains subject to the original
Designated Event Repurchase Notice and which has been or will be delivered for
purchase by the Company.

 

(d)           On or prior to the
Designated Event Repurchase Date, the Company will deposit with the Trustee (or
other paying agent appointed by the Company or if the Company is acting as its
own paying agent, set aside, segregate and hold in trust as provided in Section
6.04) an amount of money sufficient to repurchase on the Designated Event
Repurchase Date all the Notes to be repurchased on such date at the appropriate
repurchase price, together with accrued Interest to, but excluding, the
Designated Event Repurchase Date; provided that if such payment is made on
the Designated Event Repurchase Date, it must be received by the Trustee or
paying agent, as the case may be, by 11:00 a.m. New York City time, on such
date.  Subject to receipt of funds
and/or Notes by the Trustee (or other paying agent appointed by the Company),
payment for Notes surrendered for repurchase (and not withdrawn) prior to the
Designated Event Expiration Time

 

30

 

will be made promptly (but in no event more
than five (5) Business Days) following the later of (x) the close of
business on the Designated Event Repurchase Date with respect to such Note (provided
the holder has satisfied the conditions in Section 3.05(a)) and (y) the
time of delivery of such Note to the Trustee (or other paying agent appointed
by the Company) by the holder thereof in the manner required by Section 3.05 by
mailing checks for the amount payable to the holders of such Notes entitled
thereto as they shall appear in the Note Register.

 

If the Trustee (or other paying agent appointed by the
Company) holds money sufficient to repurchase on the Designated Event
Repurchase Date all the Notes or portions thereof that are to be purchased as
of the Designated Event Repurchase Date, then on or after the Designated Event
Repurchase Date (i) the Notes will cease to be outstanding, (ii) Interest
on the Notes will cease to accrue, and (iii) all other rights of the
holders of such Notes will terminate, whether or not book-entry transfer of the
Notes has been made or the Notes have been delivered to the Trustee or paying
agent, other than the right to receive the repurchase price upon delivery of
the Notes.

 

(e)           In the case of a
reclassification, change, consolidation, merger, combination, sale or
conveyance to which Section 16.06 applies, in which the Common Stock of the
Company is changed or exchanged as a result into the right to receive stock,
securities or other property or assets (including cash), which includes shares
of Common Stock of the Company or shares of common stock of another Person that
are, or upon issuance will be, traded on a United States national securities
exchange or approved for trading on an established automated over-the-counter
trading market in the United States and such shares constitute at the time such
change or exchange becomes effective in excess of 50% of the aggregate Fair
Market Value of such stock, securities or other property or assets (including
cash) (as determined by the Company, which determination shall be conclusive
and binding), then the Person formed by such consolidation or resulting from
such merger or which acquires such assets, as the case may be, shall execute
and deliver to the Trustee a supplemental indenture (accompanied by an Opinion
of Counsel that such supplemental indenture complies with this Indenture and
the Trust Indenture Act as in force at the date of execution of such
supplemental indenture) modifying the provisions of this Indenture relating to
the right of holders of the Notes to cause the Company to repurchase the Notes
following a Designated Event, including without limitation the applicable
provisions of this Section 3.05(a) and the definitions of Common Stock and
Designated Event, as appropriate, as determined in good faith by the Company
(which determination shall be conclusive and binding), to make such provisions
apply to such other Person if different from the Company and the common stock
issued by such Person (in lieu of the Company and the Common Stock of the
Company).

 

(f)            The Company will
comply with the provisions of Rule 13e-4 and any other tender offer rules under
the Exchange Act (including, without

 

31

 

limitation, filing a Schedule TO or other
schedule) to the extent then applicable in connection with the repurchase
rights of the holders of Notes in the event of a Designated Event.

 

Section 3.06.  Repurchase of Notes by the Company at Option
of Holders.

 

Unless the Company has elected to redeem all of the
Notes in accordance with Section 3.01, Notes shall be purchased by the Company
pursuant to the terms of the Notes at the option of the holder on May 1, 2009
(the “Repurchase
Date”), for cash, at a repurchase price of 100% of the principal
amount, plus any accrued and unpaid Interest to, but excluding, the Repurchase
Date, subject to the satisfaction by or on behalf of the holder of the
requirements set forth in the provisions of Section 3.06(a); provided
that no Notes may be repurchased by the Company pursuant to this Section 3.06
if the principal amount of the Notes has been accelerated and such acceleration
has not been rescinded on or prior to the Repurchase Date.  Repurchases of Notes under this Section 3.06
shall be made, at the option of the holder thereof, upon:

 

(a)           delivery to the Trustee
(or other paying agent appointed by the Company) by a holder of a duly
completed notice (the “Repurchase Notice”) in the form set forth
on the reverse of the Note during the period beginning at any time from the
opening of business on the date that is 20 Business Days prior to the
Repurchase Date until the close of business on the date that is two Business
Days prior to the Repurchase Date; and

 

(b)           delivery or book-entry
transfer of the Notes to the Trustee (or other paying agent appointed by the
Company) at any time after delivery of the Repurchase Notice (together with all
necessary endorsements) at the Corporate Trust Office or any other office of
the Trustee (or other paying agent appointed by the Company) in the Borough of
Manhattan as provided in Section 6.02, such delivery being a condition to
receipt by the holder of the repurchase price therefor; provided that such
repurchase price shall be so paid pursuant to this Section 3.06 only if the
Note so delivered to the Trustee (or other paying agent appointed by the
Company) shall conform in all respects to the description thereof in the
related Repurchase Notice.

 

The Company shall purchase from the holder thereof,
pursuant to this Section 3.06, a portion of a Note, if the principal amount of
such portion is $1,000 or a multiple of $1,000.  Provisions of this Indenture that apply to the purchase of all of
a Note also apply to the purchase of such portion of such Note.

 

Any purchase by the Company contemplated pursuant to
the provisions of this Section 3.06 shall be consummated by the delivery of the
consideration to be received by the holder promptly following the later of the
Repurchase Date and the time of the book-entry transfer or delivery of the
Note.

 

32

 

Notwithstanding anything herein to the contrary, any
holder delivering to the Trustee (or other paying agent appointed by the
Company) a Repurchase Notice contemplated by this Section 3.06 shall have the
right to withdraw such Repurchase Notice at any time prior to the close of
business on the Repurchase Date by delivery of a written notice of withdrawal
to the Trustee (or other paying agent appointed by the Company) in accordance
with Section 3.08.  The Company is not
obligated under this Section 3.06 to repurchase notes listed in such written
notice of withdrawal.

 

The Trustee (or other paying agent appointed by the
Company) shall promptly notify the Company of the receipt by it of any
Repurchase Notice or written notice of withdrawal thereof.

 

Section 3.07.  Company Repurchase Notice.

 

(a)           The Notes to be
repurchased on any Repurchase Date pursuant to Section 3.06 will be paid for in
cash.

 

Unless the Company has elected to redeem all of the
Notes in accordance with Section 3.01, at least three Business Days before the
Company Repurchase Notice Date, the Company shall deliver an Officer’s
Certificate to the Trustee specifying:

 

(i)        the
information required by Section 3.07(b) in the Company Repurchase Notice; and

 

(ii)       whether
the Company desires the Trustee to give the Company Repurchase Notice required
by Section 3.07(b).

 

(b)           Unless the Company has
elected to redeem all of the Notes in accordance with Section 3.01, in
connection with any repurchase of Notes, the Company shall, no less than 20
Business Days prior to the Repurchase Date (the “Company Repurchase Notice Date”),
give notice to holders at their addresses shown in the Note Register setting
forth information specified in this Section 3.07(b) (the “Company Repurchase Notice”).  The Company will also give notice to
beneficial owners as required by applicable law.

 

The Company Repurchase Notice shall:

 

(1)               state the repurchase price and the
Repurchase Date to which the Company Repurchase Notice relates;

 

(2)               state the last date on which a holder
may exercise its repurchase right;

 

(3)               include a form of Repurchase Notice;

 

33

 

(4)               state the name and address of the
Trustee (or other paying agent appointed by the Company);

 

(5)               state that Notes must be surrendered to
the Trustee (or other paying agent appointed by the Company) to collect the
repurchase price;

 

(6)               if the Notes are then convertible, state
that Notes as to which a Repurchase Notice has been given may be converted only
if the Repurchase Notice is withdrawn in accordance with the terms of this
Indenture; and

 

(7)               state the CUSIP number of the Notes.

 

(c)           The Company will comply
with the provisions of Rule 13e-4 and any other tender offer rules under the
Exchange Act (including, without limitation, filing a Schedule TO or other
schedule) to the extent then applicable in connection with the repurchase
rights of the holders of Notes.

 

Section 3.08.  Effect of Designated Event Repurchase Notice
and Repurchase Notice.

 

(a)           Upon receipt by the
Trustee (or other paying agent appointed by the Company) of the Designated
Event Repurchase Notice specified in Section 3.05(a), the holder of the Note in
respect of which such Designated Event Repurchase Notice was given shall
(unless such Designated Event Repurchase Notice is validly withdrawn) thereafter
be entitled to receive solely the repurchase price with respect to such
Note.  Such repurchase price shall be
paid to such Noteholder, subject to receipt of funds and/or Notes by the
Trustee (or other paying agent appointed by the Company), promptly following
the later of (x) the Designated Event Repurchase Date with respect to such Note
(provided the holder has satisfied the conditions in Section 3.05(a)) and (y)
the time of delivery of such Note to the Trustee (or other paying agent
appointed by the Company) by the holder thereof in the manner required by
Section 3.05(a).  Notes in respect of
which a Designated Event Repurchase Notice has been given by the holder thereof
may not be converted pursuant to Article 16 hereof on or after the date of the
delivery of such Designated Event Repurchase Notice unless such Designated
Event Repurchase Notice has first been validly withdrawn.

 

(b)           Upon receipt by the
Trustee (or other paying agent appointed by the Company) of the Repurchase
Notice specified in Section 3.06(a), the holder of the Note in respect of which
such Repurchase Notice was given shall (unless such Repurchase Notice is
validly withdrawn) thereafter be entitled to receive solely the repurchase
price with respect to such Note.  Such
repurchase price shall be paid to such Noteholder, subject to receipt of funds
and/or Notes by the Trustee (or other paying agent appointed by the Company),
promptly following the later of (x) the Repurchase Date with respect to such
Note (provided the holder has satisfied the conditions in Section 3.06(a)) and
(y) the time of delivery of such

 

34

 

Note to the Trustee (or other paying agent
appointed by the Company) by the holder thereof in the manner required by
Section 3.06(a).  Notes in respect of
which a Repurchase Notice has been given by the holder thereof may not be
converted pursuant to Article 16 hereof on or after the date of the delivery of
such Repurchase Notice unless such Repurchase Notice has first been validly
withdrawn.

 

(c)           A Designated Event
Repurchase Notice or Repurchase Notice may be withdrawn by means of a written
notice of withdrawal delivered to the office of the Trustee (or other paying
agent appointed by the Company) in accordance with the Designated Event
Repurchase Notice or Repurchase Notice, as the case may be, at any time prior
to the close of business on the Designated Event Repurchase Date or Repurchase
Date, as the case may be, specifying:

 

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

 

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

 

(iii)      the
principal amount, if any, of such Note which remains subject to the original
Designated Event Repurchase Notice or Repurchase Notice, as the case may be,
and which has been or will be delivered for repurchase by the Company.

 

Section 3.09.  Deposit of Repurchase Price.

 

(a)           Prior to 10:00 a.m.
(New York City Time) on the Business Day following a Designated Event
Repurchase Date or Repurchase Date, the Company shall deposit with the Trustee
(or other paying agent appointed by the Company; or, if the Company or a
Subsidiary or an Affiliate of either of them is acting as the paying agent,
shall segregate and hold in trust as provided in Section 6.04) an amount of
cash (in immediately available funds if deposited on such Business Day),
sufficient to pay the aggregate repurchase price of all the Notes or portions
thereof that are to be redeemed as of such Designated Event Repurchase Date or
Repurchase Date.

 

(b)           If the Trustee or other
paying agent appointed by the Company, or the Company or a Subsidiary or
Affiliate of either of them, if such entity is acting as the paying agent,
holds cash sufficient to pay the aggregate repurchase price of all the Notes,
or portions thereof, that are to be repurchased as of a Designated Event
Repurchase Date or Repurchase Date, then on or after such Designated Event
Repurchase Date or Repurchase Date, as the case may be, (i) the Notes will
cease to be outstanding, (ii) Interest on the Notes will cease to accrue, and
(iii) all other rights of the holders of such Notes will terminate, whether or
not book-entry

 

35

 

transfer of the Notes has been made or the
Notes have been delivered to the Trustee or paying agent, other than the right
to receive the repurchase price upon delivery of the Notes.

 

Section 3.10.  Notes Repurchased in Part.  Upon presentation of any Note
repurchased pursuant to Section 3.05 or Section 3.06, as the case may be, only
in part, the Company shall execute and the Trustee shall authenticate and make
available for delivery to the holder thereof, at the expense of the Company, a
new Note or Notes, of any authorized denomination, in aggregate principal
amount equal to the unrepurchased portion of the Notes presented.

 

Section 3.11.  Repayment to the Company.  The Trustee (or other paying
agent appointed by the Company) shall return to the Company any cash or money
that remains unclaimed as provided in Section 14.04 held for them for the payment
of the repurchase price pursuant to Section 3.05 or Section 3.06, as the case
may be; provided that to the extent that the aggregate amount of cash or money
deposited by the Company pursuant to Section 3.05(d) or Section 3.09, as the
case may be, exceeds the aggregate repurchase price of the Notes or portions
thereof which the Company is obligated to purchase as of the Designated Event
Repurchase Date or the Repurchase Date, as the case may be, then, unless
otherwise agreed in writing with the Company, promptly after the Business Day
following the Designated Event Repurchase Date or the Repurchase Date, as the
case may be, the Trustee shall return any such excess to the Company together
with interest, if any, thereon.

 

ARTICLE 4

CONTINGENT INTEREST

 

Section 4.01.  Contingent Interest.

 

Beginning with the six-month period commencing May 1,
2009, the Company will pay contingent interest (“Contingent Interest”) to the
Noteholders for any six-month period if the average Trading Price for the five
Trading Days immediately preceding the first day of the applicable six-month
period equals or exceeds 120% of the principal amount of the Notes.  For any six-month period when Contingent
Interest is payable, the Contingent Interest payable on each $1,000 principal amount
of Note shall equal 0.25% of the average Trading Price for $1,000 principal
amount of Notes during the five Trading Day measuring period immediately
preceding the first day of applicable six-month period used to determine
whether Contingent Interest must be paid.

 

The Trustee’s sole responsibility pursuant to this
Section 4.01 shall be to obtain the Trading Price of the Notes for each of the
five Trading Days immediately preceding the first day of the applicable
six-month period and to provide such information to the Company.  The Company shall determine whether holders
are entitled to receive Contingent Interest, and if so, provide

 

36

 

notice pursuant to
Section 4.03.  Notwithstanding any term
contained in this Indenture or any other document to the contrary, the Trustee
shall have no responsibilities, duties or obligations for or with respect to
(i) determining whether the Company must pay Contingent Interest or (ii)
determining the amount of Contingent Interest, if any, payable by the Company.

 

Section 4.02.  Payment of Contingent Interest.

 

Contingent Interest for any six-month period shall be
paid on the applicable Interest payment date to the Person in whose name any
Note (or its Predecessor Note) is registered on the Note Register at the
corresponding record date.  Contingent
Interest due under this Article 4 shall be treated for all purposes of this
Indenture like any other interest accruing on the Notes.

 

Section 4.03.  Contingent Interest Notification.

 

By the third Business Day of a six-month period for
which Contingent Interest will be paid, the Company will disseminate a press
release through Reuters Economic Services and Bloomberg Business News stating
that Contingent Interest will be paid on the Notes and identifying such
six-month period as the six-month period for which such Contingent Interest
will be paid.

 

ARTICLE 5

SUBORDINATION OF NOTES

 

Section 5.01.  Agreement of Subordination.  The Company covenants and agrees,
and each holder of Notes issued hereunder by its acceptance thereof likewise
covenants and agrees, that all Notes shall be issued subject to the provisions
of this Article 5, and each Person holding any Note, whether upon original
issue or upon registration of transfer, assignment or exchange thereof, accepts
and agrees to be bound by such provisions.

 

The payment of
all Note Obligations (including, but not limited to, the redemption price with
respect to the Notes called for redemption in accordance with Section 3.01 or
the repurchase price with respect to Notes submitted for repurchase in
accordance with Section 3.05 or Section 3.06, as the case may be, as provided
in this Indenture or any other payment payable in respect of Notes pursuant to
the provisions of this Indenture) issued hereunder shall, to the extent and in
the manner hereinafter set forth, be subordinated and subject in right of
payment to the prior payment in full in cash (or as otherwise agreed to by the
holders of Senior Indebtedness) of all Senior Indebtedness, whether outstanding
at the date of this Indenture or thereafter incurred.

 

No provision
of this Article 5 shall prevent the occurrence of any default or Event of
Default hereunder or have any effect on the rights of the holders of the Notes
or the Trustee to accelerate the maturity of the Notes.

 

37

 

Section 5.02.  No Payments to Noteholders upon Defaults
Relating to Designated Senior Indebtedness. 
(a)  No payment shall be made with respect to
the principal (including, but not limited to, the redemption price with respect
to Notes called for redemption in accordance with Section 3.01 or the
repurchase price with respect to Notes submitted for repurchase in accordance
with Section 3.05 or Section 3.06, as the case may be, as provided in this
Indenture or any other payment payable in respect of Notes pursuant to the
provisions of this Indenture) of or Interest (including interest accruing after
filing of a petition initiating any proceeding under state, federal or foreign
bankruptcy law, whether or not such interest is allowed or allowable under such
proceedings) on the Notes or any other Note Obligations, except payments and
distributions made by the Trustee as permitted by the first or second paragraph
of Section 5.09, if:

 

(i)        a
default in the payment of principal (including any letter of credit
reimbursement obligations), premium, if any, interest, rent, commissions or
other obligations in respect of Designated Senior Indebtedness occurs and is
continuing (or, in the case of Designated Senior Indebtedness for which there
is a period of grace, in the event of such a default that continues beyond the
period of grace, if any, specified in the instrument or lease evidencing such
Designated Senior Indebtedness) or any other default on Designated Senior
Indebtedness occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms (a “Payment Default”); or

 

(ii)       a
default or event of default, other than a Payment Default, on any Designated
Senior Indebtedness occurs and is continuing that permits holders of such
Designated Senior Indebtedness to accelerate its maturity without further
notice (except such notice as may be required to effect such acceleration) (or
in the case of any lease that is Designated Senior Indebtedness, a default
occurs and is continuing that permits the lessor to either terminate the lease
or require the Company to make an irrevocable offer to terminate the lease
following an event of default thereunder) and the Trustee receives a notice of
the default (a “Payment Blockage Notice”) from a holder of Designated Senior
Indebtedness or a Representative of Designated Senior Indebtedness (a “Non-Payment
Default”).

 

Any number of
Payment Blockage Notices may be given during the period referred to in clause
(b)(2) below; provided that during any period of 360 consecutive days only
one such period may commence and the duration of such period may not exceed 179
days.  No Non-Payment Default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such Non-Payment Default shall have been cured or waived
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action or any breach of a financial covenant for a period ending
after the date on which such Payment Blockage Notice becomes effective that, in
either case, would give

 

38

 

rise to an event of default pursuant to any
provision under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose).

 

(b)           The Company may and
shall resume payments on and distributions in respect of the Notes (including,
but not limited to, the redemption price with respect to Notes called for
redemption in accordance with Section 3.01 or the repurchase price with respect
to Notes submitted for repurchase in accordance with Section 3.05 or Section
3.06):

 

(1)   in the case of a Payment Default, the date upon
which any such Payment Default is cured or waived or ceases to exist, or

 

(2)   in the case of a Non-Payment Default, the earlier of
(a) the date upon which such default (and all other Non-Payment Defaults as to
which a Payment Blockage Notice has been provided) is cured or waived or ceases
to exist or (b) 179 days after the applicable Payment Blockage Notice is
received by the Trustee if the maturity of such Designated Senior Indebtedness
has not been accelerated and there is no Payment Default (or in the case of any
lease, 179 days after notice is received if the Company and the Trustee have
not received notice that the lessor under such lease has exercised its right to
terminate the lease or require the Company to make an irrevocable offer to
terminate the lease following an event of default thereunder and there is no
Payment Default), unless this Article 5 otherwise prohibits the payment or
distribution at the time of such payment or distribution (including, without
limitation, by reason of the existence of a Payment Blockage Notice that is
still in effect by the holders of other Designated Senior Indebtedness).

 

Section 5.03.  Payments over to Senior Indebtedness upon
Dissolution.  Upon any
payment by the Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due or to become due upon all Senior
Indebtedness, including all interest accrued or accruing on Senior Indebtedness
after the commencement of any such proceedings (whether or not allowed or
allowable in such proceedings), shall first be paid in full in cash (or as
otherwise agreed to by the holders of Senior Indebtedness) before any payment
is made on account of the Note Obligations (except payments made pursuant to
Article 14 from monies deposited with the Trustee pursuant thereto prior to
commencement of proceedings for such dissolution, winding up, liquidation or
reorganization), and upon any such dissolution or winding up or liquidation or
reorganization of the Company or bankruptcy, insolvency, receivership or other
similar proceeding, any payment by the Company, or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to which the holders of

 

39

 

the Notes or the Trustee would be entitled,
except for the provisions of this Article 5, shall (except as aforesaid) be
paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
holders of the Notes or by the Trustee under this Indenture if received by them
or it, directly to the holders of Senior Indebtedness (pro rata to such holders
on the basis of the respective amounts of Senior Indebtedness held by such
holders, or as otherwise required by law or a court order) or their
Representative or Representatives, as their respective interests may appear, to
the extent necessary to pay all Senior Indebtedness in full in cash (or as
otherwise agreed to by the holders of Senior Indebtedness), after giving effect
to any concurrent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the holders of the
Securities or to the Trustee.

 

For purposes
of this Article 5, the words, “cash, property or securities” shall not be
deemed to include shares of Common Stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article 5 with respect to
the Notes to the payment of all Senior Indebtedness which may at the time be
outstanding; provided that (i) the Senior Indebtedness is assumed by the
new corporation, if any, resulting from any reorganization or readjustment, and
(ii) the rights of the holders of Senior Indebtedness (other than leases which
are not assumed by the Company or the new corporation, as the case may be) are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article 13 shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 5.02 if such
other Person shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article 13.

 

Section 5.04.  Prior Payment of Senior Indebtedness upon
Acceleration of Notes.  If
the maturity of the Notes has been accelerated because of an Event of Default,
no payment or distribution shall be made to the Trustee or any holder of Notes
in respect of the Note Obligations (including, but not limited to, the
redemption price with respect to the Notes called for redemption in accordance
with Section 3.01 or submitted for repurchase in accordance with Section 3.05
or Section 3.06, as the case may be, as provided in this Indenture), except
payments and distributions made by the Trustee as permitted by the first or
second paragraph of Section 5.09, until all Senior Indebtedness has been paid
in full in cash (or as otherwise agreed to by the holders of Senior
Indebtedness) or such acceleration is rescinded in accordance with the terms of
this Indenture. If payment of the Notes is accelerated because of an Event of
Default, the Company

 

40

 

or, at the Company’s request and expense, the
Trustee shall promptly notify holders of Senior Indebtedness of the
acceleration.

 

Section 5.05.  Payment over to Senior Indebtedness.  In the event that,
notwithstanding Sections 5.02, 5.03 or 5.04, any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities (including, without limitation, by way of setoff or otherwise),
prohibited by Section 5.02, 5.03 or 5.04 shall be received by the Trustee or
the holders of the Notes before all Senior Indebtedness is paid in full in cash
(or as otherwise agreed to by the holders of Senior Indebtedness), such payment
or distribution shall be held in trust for the benefit of and shall be
forthwith paid over or delivered to the holders of Senior Indebtedness or their
Representative or Representatives, as their respective interests may appear,
for application to the payment of any Senior Indebtedness remaining unpaid to
the extent necessary to pay all Senior Indebtedness in full in cash (or as
otherwise agreed to by the holders of Senior Indebtedness) after giving effect
to any concurrent payment or distribution to or for the holders of such Senior
Indebtedness.

 

Nothing in
Section 5.02, 5.03 or 5.04 and this Section shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 9.06.

 

Section 5.06.  Subrogation.  Subject to the payment in full in cash (or as
otherwise agreed to by the holders of Senior Indebtedness) of all Senior
Indebtedness, the rights of the holders of the Notes shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Article 5 (equally and ratably
with the holders of all Indebtedness of the Company which by its express terms
is subordinated to other Indebtedness of the Company to substantially the same
extent as the Notes are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the principal of and Interest on
the Notes shall be paid in full, and, for the purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness of any
cash, property or securities to which the holders of the Notes or the Trustee
would be entitled except for the provisions of this Article 5, and no payment
pursuant to the provisions of this Article 5, to or for the benefit of the
holders of Senior Indebtedness by holders of the Notes or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness, and
the holders of the Notes, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness, and no payments or distributions of cash,
property or securities to or for the benefit of the holders of the Notes
pursuant to the subrogation provisions of this Article 5, which would otherwise
have been paid to the holders of Senior Indebtedness, shall, as among the
Company and its creditors other than the holders of Notes, be deemed to be a
payment by the Company to or for the account of the Notes. It is understood
that the provisions of this Article 5 are intended solely for the purposes of
defining the

 

41

 

relative rights of the holders of the Notes,
on the one hand, and the holders of the Senior Indebtedness, on the other hand.

 

Section 5.07.  Payment Obligations Unconditional.  Nothing contained in this Article
5 or elsewhere in this Indenture or in the Notes is intended to or shall
impair, as among the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Notes, the obligation of the Company,
which is absolute and unconditional, to pay to the holders of the Notes the
principal of, premium, if any, and Interest on the Notes  as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holders of the Notes and creditors of the Company other
than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or, subject to Section 8.04, the holder of any Note
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article 5 of
the holders of Senior Indebtedness in respect of cash, property or securities
of the Company received upon the exercise of any such remedy.

 

Section 5.08.  Authorization to Effect Subordination.  Each holder of a Note by the
holder’s acceptance thereof authorizes and directs the Trustee on the holder’s
behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Article 5 and appoints the Trustee to act as
the holder’s attorney-in-fact for any and all such purposes. If the Trustee
does not file a proper proof of claim or proof of debt in the form required in
any proceeding referred to in the third paragraph of Section 8.02 hereof at
least thirty (30) days before the expiration of the time to file such claim,
the holders of any Senior Indebtedness or their Representatives are hereby
authorized to file an appropriate claim for and on behalf of the holders of the
Notes.

 

Section 5.09.  Notice to Trustee.  The Company  shall give prompt written notice in the
form of an Officer’s Certificate to a Responsible Officer of the Trustee and to
any paying agent of any fact known to the Company that would prohibit the
making of any payment of monies to or by the Trustee or any paying agent in
respect of the Notes pursuant to the provisions of this Article 5.
Notwithstanding the provisions of this Article 5 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Notes pursuant to the provisions of this Article 5,
unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office from the Company (in the
form of an Officer’s Certificate) or a Representative or a holder or holders of
Senior Indebtedness, and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 9.01, shall be entitled in all
respects to assume that no such facts exist; provided that if on a date
not less than one Business Day prior to the date upon which by the terms hereof
any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or Interest on
any Note) the Trustee shall not

 

42

 

have received, with respect to such monies,
the notice provided for in this Section 5.09, then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and
authority to apply monies received to the purpose for which they were received,
and shall not be affected by any notice to the contrary that may be received by
it on or after such prior date.

 

Notwithstanding
anything in this Article 5 to the contrary, nothing shall prevent any payment
by the Trustee to the Noteholders of monies deposited with it pursuant to
Section 14.01.

 

The Trustee,
subject to the provisions of Section 9.01, shall be entitled to rely on the
delivery to it of a written notice by a Representative or a person representing
himself to be a holder of Senior Indebtedness (or a trustee on behalf of such
holder) to establish that such notice has been given by a Representative or a
holder of Senior Indebtedness or a trustee on behalf of any such holder or
holders. The Trustee shall not be required to make any payment or distribution
to or on behalf of a holder of Senior Indebtedness pursuant to this Article 5
unless it has received satisfactory evidence as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article 5.

 

Section 5.10.  Trustee’s Relation to Senior
Indebtedness.  The Trustee,
in its individual capacity, shall be entitled to all the rights set forth in
this Article 5 in respect of any Senior Indebtedness at any time held by it, to
the same extent as any other holder of Senior Indebtedness, and this Indenture
shall not deprive the Trustee of any of its rights as such holder.

 

With respect
to the holders of Senior Indebtedness, the Trustee undertakes to perform or to
observe only such of its covenants and obligations as are specifically set
forth in this Article 5, and no implied covenants or obligations with respect
to the holders of Senior Indebtedness shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and, subject to the provisions of Section 9.01,
the Trustee shall not be liable to any holder of Senior Indebtedness (i) for
any failure to make any payments or distributions to such holder or (ii) if it
shall pay over or deliver money to holders of Notes, the Company or any other
Person in compliance with this Article 5.

 

Section 5.11.  No Impairment of Subordination.  No right of any present or future
holder of any Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in  good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have
or otherwise be charged with. Senior Indebtedness may be created, renewed or
extended and holders of Senior

 

43

 

Indebtedness may exercise any rights under
any instrument creating or evidencing such Senior Indebtedness, including,
without limitation, any waiver of default thereunder, without any notice to or
consent from the holders of the Notes or the Trustee.  No compromise, alteration, amendment, modification, extension,
renewal or other change of, or waiver, consent or other action in respect of,
any liability or obligation under or in respect of the Senior Indebtedness or
any terms or conditions of any instrument creating or evidencing such Senior
Indebtedness shall in any way alter or affect any of the provisions of this
Article 5 or the subordination of the Notes provided thereby.

 

Section 5.12.  Certain Conversions Not Deemed Payment.  For the purposes of this Article
5 only, (1) the issuance and delivery of Junior Securities upon conversion of
Notes in accordance with Article 16 and (2) the payment, issuance or delivery
of cash, property or securities upon conversion of a Note as a result of any
transaction specified in Section 16.06 shall not be deemed to constitute a
payment or distribution on account of the principal of or Interest on Notes or
on account of the purchase or other acquisition of Notes.  For the purposes of this Section 5.12, the
term “Junior
Securities” means (a) Common Stock of the Company or (b) securities
of the Company that are subordinated in right of payment to all Senior
Indebtedness that may be outstanding at the time of issuance or delivery of
such securities to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Article 5. Nothing
contained in this Article 5 or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company, its creditors (other than
holders of Senior Indebtedness) and the Noteholders, the right, which is
absolute and unconditional, of the holder of any Note to convert such Note in
accordance with Article 16.

 

Section 5.13.  Article Applicable to Paying Agents.  If at any time any paying agent
other than the Trustee shall have been appointed by the Company and be then
acting hereunder, the term “Trustee” as used in this Article 5 shall
(unless the context otherwise requires) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article 5 in addition to or
in place of the Trustee; provided that the first paragraph of
Section 5.09 shall not apply to the Company or any Affiliate of the Company if
it or such Affiliate acts as paying agent.

 

The Trustee
shall not be responsible for the actions or inactions of any other paying
agents (including the Company if acting as its own paying agent) and shall have
no control of any funds held by such other paying agents.

 

Section 5.14.  Senior Indebtedness Entitled to Rely.  The holders of Senior
Indebtedness shall have the right to rely upon the provisions of this Article
5, and no amendment or modification of the provisions contained herein shall
diminish the rights of such holders unless such holders shall have agreed in
writing thereto.

 

44

 

Section 5.15.  Reliance on Judicial Order or Certificate of
Liquidating Agent.  Upon any
payment or distribution of assets of the Company referred to in this Article 5,
the Trustee and the Noteholders shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction (provided that the foregoing
shall apply only if such court has been fully apprised of the provisions of
this Article 5) in which such insolvency, bankruptcy, receivership,
liquidation, reorganization, dissolution, winding up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy,
liquidating trustee, custodian, receiver, assignee for the benefit of
creditors, agent or other Person making such payment or distribution or a
certificate of a Representative of the holders of Designated Senior Indebtedness,
delivered to the Trustee or to the Noteholders, for the purpose of ascertaining
the Persons entitled to participate in such payment or distribution, the
holders of Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 5.

 

Section 5.16.  Anti-Layering Covenant.  The Company covenants and agrees
that it shall not incur, directly or indirectly, any Indebtedness that is
subordinated or junior in right of payment to Senior Indebtedness unless such
Indebtedness (a) is senior subordinated Indebtedness that is pari passu with
the Notes or (b) is expressly subordinated in right of payment to the Company’s
existing senior subordinated Indebtedness, including the Notes.  For these purposes, unsecured Indebtedness
shall not be deemed to be subordinated or junior in right of payment to any
secured Indebtedness merely because it is unsecured.

 

Section 5.17.  Limitation on Liens.  The Company will not, directly or
indirectly, incur or permit to exist any Lien securing Indebtedness that is not
Senior Indebtedness unless contemporaneously therewith effective provision is
made to secure the Notes equally and ratably with (or on a senior basis to, in
the case of Indebtedness subordinated in right of payment to the Notes) such
secured Indebtedness for so long as such secured Indebtedness is secured by any
Lien.

 

ARTICLE 6

PARTICULAR COVENANTS OF THE COMPANY

 

Section 6.01.  Payment of Principal and Interest.  The Company covenants and agrees
that it will duly and punctually pay or cause to be paid the principal
(including the redemption price or repurchase price upon redemption or
repurchase, in each case pursuant to Article 3, as applicable) and Interest on
each of the Notes at the places, at the respective times and in the manner
provided herein and in the Notes.

 

Section 6.02.  Maintenance of Office or Agency.  The Company will maintain an
office or agency in the Borough of Manhattan, The City of New York,

 

45

 

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

 

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

 

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

 

So long as the
Trustee is the Note Registrar, the Trustee agrees to mail, or cause to be
mailed, the notices set forth in Section 9.10(a) and the third paragraph of
Section 9.11.  If co-registrars have
been appointed in accordance with this Section, the Trustee shall mail such
notices only to the Company and the holders of Notes it can identify from its
records.

 

Section 6.03.  Appointments to Fill Vacancies in Trustee’s
Office.  The Company,
whenever necessary to avoid or fill a vacancy in the office of Trustee, will
appoint, in the manner provided in Section 9.10, a Trustee, so that there shall
at all times be a Trustee hereunder.

 

Section 6.04.  Provisions as to Paying Agent.  (a) If the Company shall appoint
a paying agent other than the Trustee, or if the Trustee shall appoint such a
paying agent, the Company will cause such paying agent to execute and deliver
to the Trustee an instrument in which such agent shall agree with the Trustee,
subject to the provisions of this Section 6.04:

 

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

 

(2)           that
it will give the Trustee notice of any failure by the Company (or by any other
obligor on the Notes) to make any payment of

 

46

 

the principal
of or Interest on the Notes when the same shall be due and payable; and

 

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

 

The Company
shall, one Business Day before each due date of the principal of or Interest on
the Notes, deposit with the paying agent a sum (in funds which are immediately
available on the due date for such payment) sufficient to pay such principal or
Interest, and (unless such paying agent is the Trustee) the Company will
promptly notify the Trustee of any failure to take such action.

 

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

 

(c)           Anything in this
Section 6.04 to the contrary notwithstanding, the Company may, at any time, for
the purpose of obtaining a satisfaction and discharge of this Indenture, or for
any other reason, pay or cause to be paid to the Trustee all sums held in trust
by the Company or any paying agent hereunder as required by this Section 6.04,
such sums to be held by the Trustee upon the trusts herein contained and upon
such payment by the Company or any paying agent to the Trustee, the Company or
such paying agent shall be released from all further liability with respect to
such sums.

 

(d)           Anything in this
Section 6.04 to the contrary notwithstanding, the agreement to hold sums in
trust as provided in this Section 6.04 is subject to Sections 14.03 and 14.04.

 

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

 

Section 6.05.  Existence. 
Subject to Article 13, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence and rights (charter and statutory); provided that the Company
shall not be required to preserve any such right if the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not disadvantageous in any
material respect to the Noteholders.

 

47

 

Section 6.06.  Rule 144A Information Requirement.  Within the period prior to the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision), the Company covenants
and agrees that it shall, during any period in which it is not subject to
Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Notes or any Common Stock issued upon conversion thereof
which continue to be Restricted Securities in connection with any sale thereof
and any prospective purchaser of Notes or such Common Stock designated by such
holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder or
beneficial holder of the Notes or such Common Stock and it will take such
further action as any holder or beneficial holder of such Notes or such Common
Stock may reasonably request, all to the extent required from time to time to
enable such holder or beneficial holder to sell its Notes or Common Stock
without registration under the Securities Act within the limitation of the
exemption provided by Rule 144A, as such Rule may be amended from time to
time.  Upon the request of any holder or
any beneficial holder of the Notes or such Common Stock, the Company will
deliver to such holder a written statement as to whether it has complied with
such requirements.

 

Section 6.07.  Stay, Extension and Usury Laws.  The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law or other similar law which would prohibit or
forgive the Company from paying all or any portion of the principal of or Interest
on the Notes as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of
this Indenture and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not, by resort to any such law, hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.

 

Section 6.08.  Compliance Certificate.  The Company shall deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company, a certificate signed by either the principal executive officer,
principal financial officer or principal accounting officer of the Company,
stating whether or not to the best knowledge of the signer thereof the Company
is in default in the performance and observance of any of the terms, provisions
and conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and the status thereof of
which the signer may have knowledge.

 

The Company
will deliver to the Trustee, promptly upon becoming aware of (i) any default in
the performance or observance of any covenant, agreement or condition contained
in this Indenture, or (ii) any Event of Default, an Officer’s

 

48

 

Certificate specifying with particularity
such default or Event of Default and further stating what action the Company
has taken, is taking or proposes to take with respect thereto.

 

Any notice
required to be given under this Section 6.08 shall be delivered to a
Responsible Officer of the Trustee at its Corporate Trust Office.

 

Section 6.09.  Additional Interest Notice.  In the event that the Company is
required to pay Additional Interest to holders of Notes pursuant to the
Registration Rights Agreement, the Company will provide written notice (an “Additional
Interest Notice”) to the Trustee of the Company’s obligation to pay
Additional Interest no later than fifteen (15) days prior to the proposed
payment date for such Additional Interest, and the Additional Interest Notice
shall set forth the amount of Additional Interest to be paid by the Company on
such payment date.  The Trustee shall
not at any time be under any duty or responsibility to any holder of Notes to
determine the Additional Interest, or with respect to the nature, extent or
calculation of the amount of Additional Interest when made, or with respect to
the method employed in such calculation of the Additional Interest.

 

Section 6.10.  Contingent Debt Tax Treatment.  The Company agrees, and by
acceptance of a beneficial interest in a Note each holder and any beneficial
owner of a Note shall be deemed to have agreed, to treat the Note as
indebtedness of the Company for United States federal income tax purposes that
is subject to Treasury Regulation Section 1.1275-4 or any successor provision
(the “Contingent
Payment Regulations”) and to be bound (in the absence of an
administrative determination or judicial ruling to the contrary) by the
Company’s determination of the comparable yield and the projected payment
schedule within the meaning of the contingent payment regulations.  A holder of Notes may obtain the issue
price, amount of Tax Original Issue Discount, issue date, yield to maturity, comparable
yield and projected payment schedule for the Notes, determined by the Company
pursuant to the contingent payment regulations, by submitting a written request
for it to the Company at the following address:  Lithia Motors, Inc., 360 East Jackson Street, Medford, Oregon
97501, Attention: Senior Vice President and Chief Financial Officer.

 

Section 6.11.  Calculation of Original Issue Discount.  The Company shall file with the
Trustee promptly at the end of each calendar year (i) a written notice
specifying the amount of Tax Original Issue Discount (including daily rates and
accrual periods) accrued on outstanding Notes as of the end of such year and
(ii) such other specific information relating to such Tax Original Issue
Discount as may then be required under the Internal Revenue Code of 1986, as
amended from time to time, or the Treasury regulations promulgated thereunder.

 

49

 

ARTICLE 7

NOTEHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

 

Section 7.01.  Noteholders’ Lists.  The Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee, semiannually, not
more than fifteen (15) days after each April 1 and October 1 in each year
beginning with October 1, 2004, and at such other times as the Trustee may request
in writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses
of the holders of Notes as of a date not more than fifteen (15) days (or such
other date as the Trustee may reasonably request in order to so provide any
such notices) prior to the time such information is furnished, except that no
such list need be furnished by the Company to the Trustee so long as the
Trustee is acting as the sole Note Registrar.

 

Section 7.02.  Preservation and Disclosure of Lists.  (a) The Trustee shall preserve,
in as current a form as is reasonably practicable, all information as to the
names and addresses of the holders of Notes contained in the most recent list
furnished to it as provided in Section 7.01 or maintained by the Trustee in its
capacity as Note Registrar or co-registrar in respect of the Notes, if so
acting.  The Trustee may destroy any
list furnished to it as provided in Section 7.01 upon receipt of a new list so
furnished.

 

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

 

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

 

Section 7.03.  Reports by Trustee.  (a) Within sixty (60) days after
May 15 of each year commencing with the year 2005, the Trustee shall transmit
to holders of Notes such reports dated as of May 15 of the year in which such
reports are made concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto.  In
the event that no events have occurred under the applicable sections of the
Trust Indenture Act the Trustee shall be under no duty or obligation to provide
such reports.

 

(b)           A copy of such report
shall, at the time of such transmission to holders of Notes, be filed by the
Trustee with each stock exchange and automated

 

50

 

quotation system upon which the Notes are
listed or quoted and with the Company. 
The Company will promptly notify the Trustee in writing when the Notes
are listed on any stock exchange or automated quotation system or delisted
therefrom.

 

Section 7.04.  Reports by Company.  The Company shall file with the
Trustee (and the Commission during any period the Indenture is qualified under
the Trust Indenture Act), and transmit to holders of Notes, such information,
documents and other reports and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act, whether or not the Notes are governed by such Act; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be made
available to the Trustee within fifteen (15) days after the same is so required
to be filed with the Commission. 
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee’s receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company’s
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on an Officer’s Certificate).

 

ARTICLE 8

REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT

 

Section 8.01.  Events of Default.  In case one or more of the following Events of Default
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any administrative
or governmental body) shall have occurred and be continuing:

 

(a)           default in the payment
of the principal of any of the Notes as and when the same shall become due and
payable either at maturity or in connection with any redemption or repurchase
pursuant to Article 3, by acceleration or otherwise, whether or not such
payment is prohibited by the subordination provisions of Article 5; or

 

(b)           default in the payment
of any installment of Interest on any of the Notes as and when the same shall
become due and payable, and continuance of such default for a period of thirty
(30) days, whether or not such payment is prohibited by the subordination
provisions of Article 5; or

 

(c)           default in the
Company’s obligation to convert any Notes following the exercise by the
Noteholder of the right to convert such Notes into Common Stock pursuant to and
in accordance with Article 16; or

 

51

 

(d)           default in the
Company’s obligation to provide a Designated Event Notice on a timely basis
upon a Designated Event of which the Company is aware as provided in Section
3.05(a); or

 

(e)           failure on the part of
the Company duly to observe or perform any other of the covenants or agreements
on the part of the Company in the Notes or in this Indenture (other than a
covenant or agreement a default in whose performance or whose breach is
elsewhere in this Section 8.01 specifically dealt with) continued for a period
of sixty (60) days after the date on which written notice of such failure,
requiring the Company to remedy the same, shall have been given to the Company
by the Trustee, or the Company and a Responsible Officer of the Trustee by the
holders of at least twenty-five percent (25%) in aggregate principal amount of
the Notes at the time outstanding determined in accordance with Section 10.04;
or

 

(f)            failure on the part of
the Company duly to observe or perform the covenants contained in Sections 5.16
or 5.17 hereof continued for a period of thirty (30) days after the date thereof;
or

 

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

 

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

 

(i)            default in the payment
of principal when due at stated maturity of other Indebtedness or resulting in
acceleration of such other Indebtedness for borrowed money where the aggregate
principal amount with respect to which the default or acceleration has occurred
exceeds $5 million, and such acceleration has not been rescinded or annulled
within a period of 30 days after written notice of such failure, requiring the
Company to remedy the same, shall have been given to the Company by the
Trustee, or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the Notes at the time outstanding determined in
accordance with Section 10.04;

 

52

 

then, and in each and every such
case (other than an Event of Default specified in Section 8.01(g) or 8.01(h)),
unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the holders of not less than twenty-five percent
(25%) in aggregate principal amount of the Notes then outstanding hereunder
determined in accordance with Section 10.04, by notice in writing to the
Company (and to the Trustee if given by Noteholders), may declare the principal
of all the Notes and any Interest accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding; provided that, if the Credit Agreement is
in effect, such principal and Interest shall become due any payable only upon
the first to occur of an acceleration under the Credit Agreement or five
Business Days after receipt of written notice of such declaration by the
Company and the Representative with respect to the Credit Agreement.  If an Event of Default specified in Section
8.01(g) or 8.01(h) occurs, the principal of all the Notes and the Interest, if
any, accrued thereon shall be immediately and automatically due and payable
without necessity of further action. 
This provision, however, is subject to the conditions that if, at any
time after the principal of the Notes shall have been so declared due and
payable, and before any judgment or decree for the payment of the monies due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of Interest upon all Notes and the principal of any and all Notes
which shall have become due otherwise than by acceleration (with interest on
overdue installments of Interest, if any (to the extent that payment of such
interest is enforceable under applicable law) and on such principal at the rate
borne by the Notes, to the date of such payment or deposit) and amounts due to
the Trustee pursuant to Section 9.06, and if any and all defaults under this
Indenture, other than the nonpayment of principal of and accrued Interest on
Notes which shall have become due by acceleration, shall have been cured or waived
pursuant to Section 8.07, then and in every such case the holders of a majority
in aggregate principal amount of the Notes then outstanding, by written notice
to the Company and to the Trustee, may waive all defaults or Events of Default
and rescind and annul such declaration and its consequences; but no such waiver
or rescission and annulment shall extend to or shall affect any subsequent
default or Event of Default, or shall impair any right consequent thereon.  The Company shall notify in writing a Responsible
Officer of the Trustee, promptly upon becoming aware thereof, of any Event of
Default.

 

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

 

53

 

Section 8.02.  Payments of Notes on Default; Suit
Therefor.  The Company
covenants that (a) in case default shall be made in the payment of any
installment of Interest upon any of the Notes as and when the same shall become
due and payable, and such default shall have continued for a period of thirty
(30) days, or (b) in case default shall be made in the payment of the principal
of any of the Notes as and when the same shall have become due and payable,
whether at maturity of the Notes or in connection with any redemption or
repurchase, by or under this Indenture, declaration or otherwise, then, upon
demand of the Trustee, the Company will pay to the Trustee, for the benefit of
the holders of the Notes, the whole amount that then shall have become due and
payable on all such Notes for principal or Interest as the case may be, with
interest upon the overdue principal and (to the extent that payment of such
interest is enforceable under applicable law) upon the overdue installments of
Interest at the rate borne by the Notes, plus 1% and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including reasonable compensation to the Trustee, its agents,
attorneys and counsel, and all other amounts due the Trustee under Section
9.06.  Until such demand by the Trustee,
the Company may pay the principal of and Interest on the Notes to the
registered holders, whether or not the Notes are overdue.

 

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

 

In case there
shall be pending proceedings for the bankruptcy or for the reorganization of
the Company or any other obligor on the Notes under Title 11 of the United
States Code, or any other applicable law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, sequestrator or similar
official shall have been appointed for or taken possession of the Company or
such other obligor, the property of the Company or such other obligor, or in the
case of any other judicial proceedings relative to the Company or such other
obligor upon the Notes, or to the creditors or property of the Company or such
other obligor, the Trustee, irrespective of whether the principal of the Notes
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 8.02, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove
a claim or claims for the whole amount of principal and Interest owing and
unpaid in respect of the Notes, and, in case of any judicial proceedings, to
file such proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the

 

54

 

Trustee and of the Noteholders allowed in
such judicial proceedings relative to the Company or any other obligor on the
Notes, its or their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of any amounts due the Trustee
under Section 9.06, and to take any other action with respect to such claims,
including participating as a member of any official committee of creditors, as
it reasonably deems necessary or advisable, and, unless prohibited by law or
applicable regulations, and any receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, custodian or similar official is hereby authorized by each of the
Noteholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including counsel fees and
expenses incurred by it up to the date of such distribution.  To the extent that such payment of
reasonable compensation, expenses, advances and disbursements out of the estate
in any such proceedings shall be denied for any reason, payment of the same
shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.

 

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

 

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

 

Section 8.03.  Application of Monies Collected by
Trustee.  Subject to Article
5 hereof, any monies collected by the Trustee pursuant to this Article 8 shall
be applied in the order following, at the date or dates fixed by the Trustee
for the distribution of such monies, upon presentation of the several Notes,
and stamping thereon the payment, if only partially paid, and upon surrender
thereof, if fully paid:

 

FIRST: To the
payment of all amounts due the Trustee under Section 9.06;

 

SECOND: In
case the principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of Interest on the Notes in default in

 

55

 

the order of the maturity of the installments
of such Interest, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of Interest at the rate
borne by the Notes, such payments to be made ratably to the Persons entitled
thereto;

 

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

 

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

 

Section 8.04.  Proceedings by Noteholder.  No Noteholder shall have any
right by virtue of or by reference to any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee
written notice of an Event of Default and of the continuance thereof, as
hereinbefore provided, and unless also the holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Notes then outstanding shall
have made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable security or indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee for sixty (60) days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any such action,
suit or proceeding and no direction inconsistent with such written request
shall have been given to the Trustee pursuant to Section 8.07; it being
understood and intended, and being expressly covenanted by the taker and holder
of every Note with every other taker and holder and the Trustee, that no one or
more Noteholders shall have any right in any manner whatever by virtue of or by
reference to any provision of this Indenture to affect, disturb or prejudice
the rights of any other holder of Notes, or to obtain or seek to obtain
priority over or preference to any other such holder, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all Noteholders (except as otherwise provided
herein).  For the protection and
enforcement of this Section 8.04, each and every Noteholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.

 

56

Notwithstanding
any other provision of this Indenture and any provision of any Note, the right
of any Noteholder to receive payment of the principal (including the redemption
price upon redemption or the repurchase price upon repurchase, in each case pursuant
to Article 3), and accrued Interest on such Note, on or after the respective
due dates expressed in such Note or in the event of redemption, or to institute
suit for the enforcement of any such payment on or after such respective dates
against the Company shall not be impaired or affected without the consent of
such Noteholder.

 

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

 

Section 8.05.  Proceedings by Trustee.  In case of an Event of Default,
the Trustee may, in its discretion, proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as are
necessary to protect and enforce any of such rights, either by suit in equity
or by action at law or by proceeding in bankruptcy or otherwise, whether for
the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.

 

Section 8.06.  Remedies Cumulative and Continuing.  Except as provided in Section
2.06, all powers and remedies given by this Article 8 to the Trustee or to the
Noteholders shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
Trustee or the Noteholders, by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Noteholder to
exercise any right or power accruing upon any default or Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or any acquiescence
therein, and, subject to the provisions of Section 8.04, every power and remedy
given by this Article 8 or by law to the Trustee or to the Noteholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Noteholders.

 

Section 8.07.  Direction of Proceedings and Waiver of
Defaults by Majority of Noteholders.  The
holders of a majority in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 10.04 shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee;
provided that (a) such direction shall not be in conflict with any
rule of law or with this Indenture, (b) the Trustee may take any other action
which is not inconsistent with such direction, (c) the Trustee may

 

57

 

decline to take any action that would benefit
some Noteholder to the detriment of other Noteholders and (d) the Trustee may
decline to take any action that would involve the Trustee in personal
liability.  The holders of a majority in
aggregate principal amount of the Notes at the time outstanding determined in
accordance with Section 10.04 may, on behalf of the holders of all of the
Notes, waive any past, current or future breach of any provision hereof, or
default or Event of Default hereunder and its consequences except (i) a default
in the payment of Interest on, or the principal of, the Notes, (ii) a failure
by the Company to convert any Notes into Common Stock, (iii) a default in the
payment of the redemption price or repurchase price pursuant to Article 3 or
(iv) a default in respect of a covenant or provisions hereof which under
Article 12 cannot be modified or amended without the consent of the holders of
each or all of the Notes then outstanding or affected thereby.  Upon any such waiver, the Company, the
Trustee and the holders of the Notes shall be restored to their former
positions and rights hereunder; but no such waiver shall extend to any
subsequent other breach of any provision hereof or other default or Event of
Default or impair any right consequent thereon.  Whenever any other breach of any provision hereof or default or
Event of Default hereunder shall have been waived as permitted by this Section
8.07, said other breach of any provision hereof or default or Event of Default
shall for all purposes of the Notes and this Indenture be deemed to have been
cured and to be not continuing; but no such waiver shall extend to any
subsequent other breach of any provision hereof or other default or Event of
Default or impair any right consequent thereon.

 

Section 8.08.  Notice of Defaults.  The Trustee shall, within ninety
(90) days after a Responsible Officer of the Trustee has knowledge of the
occurrence of a default, mail to all Noteholders, as the names and addresses of
such holders appear upon the Note Register, notice of all defaults known to a
Responsible Officer, unless such defaults shall have been cured or waived
before the giving of such notice; provided that except in the case of
default in the payment of the principal of or Interest on any of the Notes, the
Trustee shall be protected in withholding such notice if and so long as a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interests of the
Noteholders.

 

Section 8.09.  Undertaking to Pay Costs.  All parties to this Indenture
agree, and each Noteholder by his acceptance thereof shall be deemed to have
agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys’ fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; provided that the provisions of this
Section 8.09 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any

 

58

 

Noteholder, or group of Noteholders, holding
in the aggregate more than ten percent in principal amount of the Notes at the
time outstanding determined in accordance with Section 10.04, or to any suit
instituted by any Noteholder for the enforcement of the payment of the
principal of or Interest on any Note on or after the due date expressed in such
Note or to any suit for the enforcement of the right to convert any Note in
accordance with the provisions of Article 16.

 

ARTICLE 9

THE TRUSTEE

 

Section 9.01.  Duties and Responsibilities of Trustee.  The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture.  In case an Event of Default has occurred (which has not been
cured or waived), the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.

 

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

 

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

 

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

 

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

 

59

 

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

 

(c)                                  the
Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the written direction of the
holders of not less than a majority in principal amount of the Notes at the
time outstanding determined as provided in Section 10.04 relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture;

 

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

 

(e)                                  the
Trustee shall not be liable in respect of any payment (as to the correctness of
amount, entitlement to receive or any other matters relating to payment) or notice
effected by the Company or any paying agent or any records maintained by any
co-registrar with respect to the Notes;

 

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

 

(g)                                 the
Trustee shall not be deemed to have knowledge of any default or Event of
Default hereunder unless it shall have been notified in writing of such default
or Event of Default by the Company or the holders of at least 10% in aggregate
principal amount of the Notes.

 

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

 

Section 9.02.  Reliance on Documents, Opinions, Etc.  Except as otherwise provided in
Section 9.01:

 

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

 

60

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)                                     the
Trustee may request that the Company deliver an Officer’s Certificate setting
forth the names of individuals and/or titles of officers authorized at such
time to take specified actions pursuant to this Indenture, which Officer’s
Certificate may be signed by any person authorized to sign an Officer’s

 

61

 

Certificate, including any person specified
as so authorized in any such certificate previously delivered and not
superseded;

 

(j)                                     any
permissive right or authority granted to the Trustee shall not be construed as
a mandatory duty; and

 

(k)                                  in
no event shall the Trustee be responsible or liable for special, indirect or
consequential loss or damage of any kind whatsoever (including, but not limited
to, loss of profit) irrespective of whether the Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of action.

 

Section 9.03.  No Responsibility for Recitals, Etc.  The recitals contained herein and
in the Notes (except in the Trustee’s certificate of authentication) shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.  The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes. 
The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered
by the Trustee in conformity with the provisions of this Indenture.

 

Section 9.04.  Trustee, Paying Agents, Conversion Agents or
Registrar May Own Notes.  The
Trustee, any paying agent, any conversion agent or Note Registrar, in its
individual or any other capacity, may become the owner or pledgee of Notes with
the same rights it would have if it were not Trustee, paying agent, conversion
agent or Note Registrar.

 

Section 9.05.  Monies to be Held in Trust.  Subject to the provisions of
Section 14.04, all monies received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received.  Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law.  The Trustee shall be
under no liability for interest on any money received by it hereunder except as
may be agreed in writing from time to time by the Company and the Trustee.

 

Section 9.06.  Compensation and Expenses of Trustee.  The Company covenants and agrees
to pay to the Trustee from time to time, and the Trustee shall be entitled to,
such compensation for all services rendered by it hereunder in any capacity
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) as mutually agreed to from time
to time in writing between the Company and the Trustee, and the Company will
pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith.  The Company also covenants to indemnify the
Trustee and any predecessor Trustee (and any officer,

 

62

 

director or employee of the Trustee), in any
capacity under this Indenture and its agents and any authenticating agent for,
and to hold them harmless against, any and all loss, liability, damage, claim
or expense including taxes (other than taxes based on the income of the
Trustee) incurred without negligence or bad faith on the part of the Trustee or
such officers, directors, employees and agent or authenticating agent, as the
case may be, and arising out of or in connection with the acceptance or
administration of this trust or in any other capacity hereunder, including the
costs and expenses of defending themselves against any claim (whether asserted
by the Company, any holder or any other Person) or liability in connection with
enforcing the provisions of the Section 9.06, except to the extent that such
loss, damage, claim, liability or expense is due to its own negligence or bad
faith.  The obligations of the Company
under this Section 9.06 to compensate or indemnify the Trustee and to pay or
reimburse the Trustee for expenses, disbursements and advances shall be secured
by a lien prior to that of the Notes upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the holders of particular Notes.  The
obligation of the Company under this Section shall survive the satisfaction and
discharge of this Indenture and the resignation or removal of the Trustee.

 

When the
Trustee and its agents and any authenticating agent incur expenses or render
services after an Event of Default specified in Section 8.01(g) or (h) with
respect to the Company occurs, the expenses and the compensation for the
services are intended to constitute expenses of administration under any
bankruptcy, insolvency or similar laws.

 

Section 9.07.  Officer’s Certificate As Evidence.  Except as otherwise provided in
Section 9.01, whenever in the administration of the provisions of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of bad faith or willful misconduct on the part of
the Trustee, be deemed to be conclusively proved and established by an
Officer’s Certificate delivered to the Trustee.

 

Section 9.08.  Conflicting Interests of Trustee.  If the Trustee has or shall
acquire a conflicting interest within the meaning of the Trust Indenture Act,
the Trustee shall either eliminate such interest or resign, to the extent and
in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.

 

Section 9.09.  Eligibility of Trustee.  There shall at all times be a
Trustee hereunder which shall be a Person that is eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and surplus of at
least $50,000,000 (or if such Person is a member of a bank holding company
system, its bank holding company shall have a combined capital and surplus of
at least $50,000,000).  If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of any supervising or examining authority,

 

63

 

then for the purposes of this Section the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.  If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
9.09, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article.

 

Section 9.10.  Resignation or Removal of Trustee.

 

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

 

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

 

(i)                       the
Trustee shall fail to comply with Section 9.08 after written request therefor
by the Company or by any Noteholder who has been a bona fide holder of a Note
or Notes for at least six (6) months; or

 

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

 

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

 

then, in any such case, the
Company may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, executed by order of the Board of Directors, one copy
of which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee, or, subject to the provisions of Section 8.09, any
Noteholder who has been a bona fide holder of a Note or Notes

 

64

 

for at least six (6) months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee; provided
that if no successor Trustee shall have been appointed and have accepted
appointment sixty (60) days after either the Company or the Noteholders has
removed the Trustee, or the Trustee resigns, the Trustee so removed may
petition, at the expense of the Company, any court of competent jurisdiction
for an appointment of a successor trustee. 
Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor trustee.

 

(c)                                  The
holders of a majority in aggregate principal amount of the Notes at the time
outstanding may at any time remove the Trustee and nominate a successor trustee
which shall be deemed appointed as successor trustee unless, within ten (10)
days after notice to the Company of such nomination, the Company objects
thereto, in which case the Trustee so removed or any Noteholder, or if such
Trustee so removed or any Noteholder fails to act, the Company, upon the terms
and conditions and otherwise as in Section 9.10(a) provided, may petition any
court of competent jurisdiction for an appointment of a successor trustee.

 

(d)                                 Any
resignation or removal of the Trustee and appointment of a successor trustee
pursuant to any of the provisions of this Section 9.10 shall become effective
upon acceptance of appointment by the successor trustee as provided in Section
9.11.

 

(e)                                  Notwithstanding
the replacement of the Trustee pursuant to this Section, the Company’s
obligations under Section 9.06 shall continue for the benefit of the retiring
Trustee.

 

Section 9.11.  Acceptance by Successor Trustee.  Any successor trustee appointed
as provided in Section 9.10 shall execute, acknowledge and deliver to the
Company and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as trustee herein; but, nevertheless, on the written request of the
Company or of the successor trustee, the trustee ceasing to act shall, upon
payment of any amount then due it pursuant to the provisions of Section 9.06,
execute and deliver an instrument transferring to such successor trustee all
the rights and powers of the trustee so ceasing to act.  Upon request of any such successor trustee,
the Company shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers.  Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property and funds held or
collected by such trustee as such, except for funds held in trust for the
benefit of holders of particular Notes, to secure any amounts then due it
pursuant to the provisions of Section 9.06.

 

65

 

No successor
trustee shall accept appointment as provided in this Section 9.11 unless, at
the time of such acceptance, such successor trustee shall be qualified under
the provisions of Section 9.08 and be eligible under the provisions of Section
9.09.

 

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

 

Section 9.12.  Succession by Merger.  Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee (including any trust created
by this Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to
all or substantially all of the corporate trust business of the Trustee, such
corporation shall be qualified under the provisions of Section 9.08 and
eligible under the provisions of Section 9.09.

 

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

 

Section 9.13.  Preferential Collection of Claims.  If and when the Trustee shall be
or become a creditor of the Company (or any other obligor upon the Notes), the
Trustee shall be subject to the provisions of the Trust Indenture Act regarding
the collection of the claims against the Company (or any such other obligor).

 

66

 

ARTICLE 10

THE NOTEHOLDERS

 

Section 10.01.  Action by Noteholders.  Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by
Noteholders in person or by agent or proxy appointed in writing, or (b) by the
record of the holders of Notes voting in favor thereof at any meeting of
Noteholders duly called and held in accordance with the provisions of Article
11, or (c) by a combination of such instrument or instruments and any such
record of such a meeting of Noteholders. 
Whenever the Company or the Trustee solicits the taking of any action by
the Noteholders, the Company or the Trustee may fix in advance of such
solicitation a date as the record date for determining holders entitled to take
such action.  The record date shall be
not more than fifteen (15) days prior to the date of commencement of
solicitation of such action.

 

Section 10.02.  Proof of Execution by Noteholders.  Subject to the provisions of
Sections 9.01, 9.02 and 11.05, proof of the execution of any instrument by a
Noteholder or its agent or proxy shall be sufficient if made in accordance with
such reasonable rules and regulations as may be prescribed by the Trustee or in
such manner as shall be satisfactory to the Trustee.  The holding of Notes shall be proved by the registry of such
Notes or by a certificate of the Note Registrar.

 

The record of
any Noteholders’ meeting shall be proved in the manner provided in Section
11.06.

 

Section 10.03.  Who Are Deemed Absolute Owners.  The Company, the Trustee, any
paying agent, any conversion agent and any Note Registrar may deem the Person
in whose name such Note shall be registered upon the Note Register to be, and
may treat it as, the absolute owner of such Note (whether or not such Note
shall be overdue and notwithstanding any notation of ownership or other writing
thereon made by any Person other than the Company or any Note Registrar) for
the purpose of receiving payment of or on account of the principal of and
Interest on such Note, for conversion of such Note and for all other purposes;
and neither the Company nor the Trustee nor any paying agent nor any conversion
agent nor any Note Registrar shall be affected by any notice to the
contrary.  All such payments so made to
any holder for the time being, or upon his order, shall be valid and, to the
extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for monies payable upon any such Note.

 

Section 10.04.  Company-Owned Notes Disregarded.  In determining whether the
holders of the requisite aggregate principal amount of Notes have

 

67

 

concurred in any direction, consent, waiver
or other action under this Indenture, Notes which are owned by the Company or
any other obligor on the Notes or any Affiliate of the Company or any other
obligor on the Notes shall be disregarded and deemed not to be outstanding for
the purpose of any such determination; provided that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, consent, waiver or other action, only Notes which a Responsible
Officer knows are so owned shall be so disregarded.  Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 10.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee’s right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or any Affiliate of the Company or any such other obligor.  In the case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.  Upon request
of the Trustee, the Company shall furnish to the Trustee promptly an Officer’s
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described Persons,
and, subject to Section 9.01, the Trustee shall be entitled to accept such
Officer’s Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Notes not listed therein are outstanding for the purpose
of any such determination.

 

Section 10.05.  Revocation of Consents; Future Holders
Bound.  At any time prior to
(but not after) the evidencing to the Trustee, as provided in Section 10.01, of
the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 10.02, revoke such action so far as concerns
such Note.  Except as aforesaid, any
such action taken by the holder of any Note shall be conclusive and binding
upon such holder and upon all future holders and owners of such Note and of any
Notes issued in exchange or substitution therefor, irrespective of whether any
notation in regard thereto is made upon such Note or any Note issued in
exchange or substitution therefor.

 

ARTICLE 11

MEETINGS OF NOTEHOLDERS

 

Section 11.01.  Purpose of Meetings.  A meeting of Noteholders may be
called at any time and from time to time pursuant to the provisions of this
Article 11 for any of the following purposes:

 

(1)                                  to
give any notice to the Company or to the Trustee or to give any directions to
the Trustee permitted under this Indenture, or to consent to the waiving of any
default or Event of Default hereunder and its

 

68

 

consequences,
or to take any other action authorized to be taken by Noteholders pursuant to
any of the provisions of Article 8;

 

(2)                                  to
remove the Trustee and nominate a successor trustee pursuant to the provisions
of Article 9;

 

(3)                                  to
consent to the execution of an indenture or indentures supplemental hereto
pursuant to the provisions of Section 12.02; or

 

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

 

Section 11.02.  Call of Meetings by Trustee.  The Trustee may at any time call
a meeting of Noteholders to take any action specified in Section 11.01, to be
held at such time and at such place as the Trustee shall determine.  Notice of every meeting of the Noteholders,
setting forth the time and place of such meeting and in general terms the
action proposed to be taken at such meeting and the establishment of any record
date pursuant to Section 10.01, shall be mailed to holders of Notes at their
addresses as they shall appear on the Note Register.  Such notice shall also be mailed to the Company.  Such notices shall be mailed not less than
ten (10) nor more than ninety (90) days prior to the date fixed for the
meeting.

 

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

 

Section 11.03.  Call of Meetings by Company or
Noteholders.  In case at any
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent (10%) in aggregate principal amount of the
Notes then outstanding, shall have requested the Trustee to call a meeting of
Noteholders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within twenty (20) days after receipt of such request,
then the Company or such Noteholders may determine the time and the place for
such meeting and may call such meeting to take any action authorized in Section
11.01, by mailing notice thereof as provided in Section 11.02.

 

Section 11.04.  Qualifications for Voting.  To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes on the record
date pertaining to such meeting.  The
only persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to

 

69

 

vote at such meeting and their counsel and
any representatives of the Trustee and its counsel and any representatives of
the Company and its counsel.

 

Section 11.05.  Regulations.  Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.

 

The Trustee
shall, by an instrument in writing, appoint a temporary chairman of the
meeting, unless the meeting shall have been called by the Company or by
Noteholders as provided in Section 11.03, in which case the Company or the
Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman.  A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the holders of a majority in principal amount of the Notes represented
at the meeting and entitled to vote at the meeting.

 

Subject to the
provisions of Section 10.04, at any meeting each Noteholder or proxyholder
shall be entitled to one vote for each $1,000 principal amount of Notes held or
represented by him; provided that no vote shall be cast or
counted at any meeting in respect of any Note challenged as not outstanding and
ruled by the chairman of the meeting to be not outstanding.  The chairman of the meeting shall have no
right to vote other than by virtue of Notes held by him or instruments in
writing as aforesaid duly designating him as the proxy to vote on behalf of
other Noteholders.  Any meeting of
Noteholders duly called pursuant to the provisions of Section 11.02 or 11.03
may be adjourned from time to time by the holders of a majority of the
aggregate principal amount of Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.

 

Section 11.06.  Voting. 
The vote upon any resolution submitted to any meeting of
Noteholders shall be by written ballot on which shall be subscribed the
signatures of the holders of Notes or of their representatives by proxy and the
outstanding principal amount of the Notes held or represented by them.  The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at
the meeting.  A record in duplicate of
the proceedings of each meeting of Noteholders shall be prepared by the
secretary of the meeting, and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that said notice was
mailed as provided in Section 11.02. 
The record shall show the principal amount of the Notes voting in favor
of

 

70

 

or against any resolution.  The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one
of the duplicates shall be delivered to the Company and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting.

 

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

 

Section 11.07.  No Delay of Rights by Meeting.  Nothing contained in this Article
11 shall be deemed or construed to authorize or permit, by reason of any call
of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any
right or rights conferred upon or reserved to the Trustee or to the Noteholders
under any of the provisions of this Indenture or of the Notes.

 

ARTICLE 12

SUPPLEMENTAL INDENTURES

 

Section 12.01.  Supplemental Indentures Without Consent of
Noteholders.  The Company,
when authorized by the resolutions of the Board of Directors, and the Trustee
may, from time to time, and at any time enter into an indenture or indentures
supplemental hereto for one or more of the following purposes:

 

(a)                                  make
provision with respect to the conversion rights of the holders of Notes
pursuant to the requirements of Section 16.06 and the repurchase obligations of
the Company pursuant to the requirements of Section 3.05 and Section 3.06;

 

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

 

(c)                                  to
evidence the succession of another Person to the Company, or successive
successions, and the assumption by the successor Person of the covenants,
agreements and obligations of the Company pursuant to Article 13;

 

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

 

71

 

enforcement upon such default or may limit
the remedies available to the Trustee upon such default;

 

(e)                                  to
provide for the issuance under this Indenture of Notes in coupon form
(including Notes registrable as to principal only) and to provide for
exchangeability of such Notes with the Notes issued hereunder in fully
registered form and to make all appropriate changes for such purpose;

 

(f)                                    to
cure any ambiguity or to correct or supplement any provision contained herein
or in any supplemental indenture that may be defective or inconsistent with any
other provision contained herein or in any supplemental indenture, or to
change, eliminate or add any new provisions in regard to matters or questions
arising under this Indenture that shall not materially and adversely affect the
interests of the holders of the Notes;

 

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

 

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

 

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

 

Any
supplemental indenture authorized by the provisions of this Section 12.01 may
be executed by the Company and the Trustee without the consent of the holders
of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 12.02.

 

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

 

Section 12.02.  Supplemental Indenture With Consent of
Noteholders.  With the
consent (evidenced as provided in Article 10) of the holders of at least a
majority in aggregate principal amount of the Notes at the time outstanding, the

 

72

 

Company, when authorized by the resolutions
of the Board of Directors, and the Trustee may, from time to time and at any
time, enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or any supplemental indenture or of modifying in
any manner the rights of the holders of the Notes; provided that no such
supplemental indenture shall, without the consent of the holder of each Note so
affected, (i) extend the fixed maturity of any Note, (ii) reduce the rate or
extend the time of payment of any Interest thereon, (iii) reduce the principal
amount thereof or reduce any amount payable on redemption or repurchase
thereof, (iv) change the obligation of the Company to repurchase any Note upon
the happening of a Designated Event in a manner adverse to the Noteholders, (v)
change the obligation of the Company to repurchase any Note at the option of a
Noteholder on a Repurchase Date in a manner adverse to the Noteholders; (vi)
impair the right of any Noteholder to institute suit for the payment thereof,
(vii) make the principal thereof or any Interest thereon payable in any coin or
currency other than that provided in the Notes, (viii) impair the right to
convert the Notes or reduce the number of shares of Common Stock or the amount
of any other property receivable by a Noteholder upon conversion, subject to
the terms set forth herein, including Section 16.06, in each case, (ix) modify
any of the provisions of this Section 12.02 or Section 8.07, except to increase
any such percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the holder of
each Note so affected, (x) change any obligation of the Company to maintain an
office or agency in the places and for the purposes set forth in Section 6.02,
(xi) modify any of the provisions of Article 5 in a manner adverse to the
Noteholders, (xii) reduce the quorum or voting requirements set forth in
Article 11 or (xiii) reduce the aforesaid percentage of Notes, the holders of
which are required to consent to any such supplemental indenture.

 

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

 

It shall not
be necessary for the consent of the Noteholders under this Section 12.02 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof.

 

Section 12.03.  Effect of Supplemental Indenture.  Any supplemental indenture
executed pursuant to the provisions of this Article 12 shall comply with the
Trust Indenture Act, as then in effect, provided that this Section 12.03 shall

 

73

 

not require such supplemental indenture or
the Trustee to be qualified under the Trust Indenture Act prior to the time
such qualification is in fact required under the terms of the Trust Indenture
Act or the Indenture has been qualified under the Trust Indenture Act, nor
shall it constitute any admission or acknowledgment by any party to such
supplemental indenture that any such qualification is required prior to the
time such qualification is in fact required under the terms of the Trust
Indenture Act or the Indenture has been qualified under the Trust Indenture
Act.  Upon the execution of any
supplemental indenture pursuant to the provisions of this Article 12, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Notes shall thereafter be determined, exercised and enforced hereunder,
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.

 

Section 12.04.  Notation on Notes.  Notes authenticated and delivered after the execution
of any supplemental indenture pursuant to the provisions of this Article 12 may
bear a notation in form approved by the Trustee as to any matter provided for
in such supplemental indenture.  If the
Company or the Trustee shall so determine, new Notes so modified as to conform,
in the opinion of the Trustee and the Board of Directors, to any modification
of this Indenture contained in any such supplemental indenture may, at the
Company’s expense, be prepared and executed by the Company, authenticated by
the Trustee (or an authenticating agent duly appointed by the Trustee pursuant
to Section 17.10) and delivered in exchange for the Notes then outstanding,
upon surrender of such Notes then outstanding.

 

Section 12.05.  Evidence of Compliance of Supplemental
Indenture to Be Furnished to Trustee.  Prior
to entering into any supplemental indenture, the Trustee shall be provided with
an Officer’s Certificate and an Opinion of Counsel as conclusive evidence that
any supplemental indenture executed pursuant hereto complies with the
requirements of this Article 12 and is otherwise authorized or permitted by
this Indenture.

 

ARTICLE 13

CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

 

Section 13.01.  Company May Consolidate on Certain
Terms.  Subject to the
provisions of Section 13.02, the Company shall not consolidate or merge with or
into any other Person or Persons (whether or not affiliated with the Company),
nor shall the Company or its successor or successors be a party or parties to
successive consolidations or mergers, nor shall the Company sell, convey,
transfer or lease the property and assets of the Company substantially as an entirety,
to any other Person (whether or not affiliated with the Company), unless: (i)
the

 

74

 

Company is the surviving Person, or the
resulting, surviving or transferee Person is organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia;(ii) upon any such consolidation, merger, sale, conveyance,
transfer or lease, the due and punctual payment of the principal of and
Interest on all of the Notes, according to their tenor and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Company, shall be expressly assumed, by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee by the Person (if other than the Company) formed by
such consolidation, or into which the Company shall have been merged, or by the
Person that shall have acquired or leased such property, and such supplemental
indenture shall provide for the applicable conversion rights set forth in
Section 16.06; and (iii) immediately after giving effect to the
transaction described above, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
happened and be continuing.

 

Section 13.02.  Successor to Be Substituted.  In case of any such
consolidation, merger, sale, conveyance, transfer or lease and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due
and punctual payment of the principal of and Interest on all of the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such successor Person shall succeed
to and be substituted for the Company, with the same effect as if it had been
named herein as the party of this first part. 
Such successor Person thereupon may cause to be signed, and may issue
either in its own name or in the name of Lithia Motors, Inc. any or all of the
Notes, issuable hereunder that theretofore shall not have been signed by the
Company and delivered to the Trustee; and, upon the order of such successor
Person instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver, or cause to be authenticated and delivered, any Notes that
previously shall have been signed and delivered by the officers of the Company
to the Trustee for authentication, and any Notes that such successor Person
thereafter shall cause to be signed and delivered to the Trustee for that
purpose.  All the Notes so issued shall
in all respects have the same legal rank and benefit under this Indenture as
the Notes theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Notes had been issued at the date of the
execution hereof.  In the event of any
such consolidation, merger, sale, conveyance, transfer or lease, upon
compliance with the provisions of this Article 13, the Person named as the “Company”
in the first paragraph of this Indenture or any successor that shall thereafter
have become such in the manner prescribed in this Article 13 may be dissolved,
wound up and liquidated at any time thereafter and such Person shall be
released from its liabilities as obligor and maker of the Notes and from its
obligations under this Indenture.

 

75

 

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

 

Section 13.03.  Opinion of Counsel to Be Given to
Trustee.  The Trustee shall
receive an Officer’s Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance, transfer or
lease and any such assumption complies with the provisions of this Article 13.

 

ARTICLE 14

SATISFACTION AND DISCHARGE OF INDENTURE

 

Section 14.01.  Discharge of Indenture.  When the Company shall deliver to
the Trustee for cancellation all Notes theretofore authenticated (other than
any Notes that have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or  all
the Notes not theretofore canceled or delivered to the Trustee for cancellation
shall have become due and payable, and the Company shall deposit with the
Trustee, in trust, funds sufficient to pay all of the Notes (other than any
Notes that shall have been mutilated, destroyed, lost or stolen and in lieu of
or in substitution for which other Notes shall have been authenticated and
delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal and any Interest due, and if the Company
shall also pay or cause to be paid all other sums payable hereunder by the
Company, then this Indenture shall cease to be of further effect (except as to
(i) rights hereunder of Noteholders to receive payments of principal of and
Interest on the Notes and the other rights, duties and obligations of
Noteholders, as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (ii) the rights, obligations and immunities of
the Trustee hereunder), and the Trustee, on written demand of the Company
accompanied by an Officer’s Certificate and an Opinion of Counsel as required
by Section 17.05 and at the cost and expense of the Company, shall execute
proper instruments acknowledging satisfaction of and discharging this
Indenture; the Company, however, hereby agrees to reimburse the Trustee for any
costs or expenses thereafter reasonably and properly incurred by the Trustee
and to compensate the Trustee for any services thereafter reasonably and
properly rendered by the Trustee in connection with this Indenture or the
Notes.

 

Section 14.02.  Deposited Monies to Be Held in Trust by
Trustee.  Subject to Section
14.04, all monies deposited with the Trustee pursuant to Section 14.01 shall be
held in trust for the sole benefit of the Noteholders, and such monies shall be
applied by the Trustee to the payment, either directly or through any paying
agent (including the Company if acting as its own paying agent), to the holders
of the particular Notes for the payment, redemption or repurchase of which such

 

76

 

monies have been deposited with the Trustee,
of all sums due and to become due thereon for principal of and Interest on the
Notes.

 

Section 14.03.  Paying Agent to Repay Monies Held.  Upon the satisfaction and
discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon written request of the Company, be
repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.

 

Section 14.04.  Return of Unclaimed Monies.  Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of or Interest on Notes and not applied but remaining unclaimed
by the holders of Notes for two years after the date upon which the principal
of or Interest on such Notes, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee on demand and all
liability of the Trustee shall thereupon cease with respect to such monies; and
the holder of any of the Notes shall thereafter look only to the Company for
any payment that such holder may be entitled to collect unless an applicable
abandoned property law designates another Person.

 

Section 14.05.  Reinstatement.  If the Trustee or the paying agent is unable to apply
any money in accordance with Section 14.02 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
and the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 14.01 until such time as the Trustee or the paying agent is
permitted to apply all such money in accordance with Section 14.02; provided
that if the Company makes any payment of Interest on or principal of any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the holders of such Notes to receive such payment from the
money held by the Trustee or paying agent.

 

ARTICLE 15

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

 

Section 15.01.  Indenture and Notes Solely Corporate
Obligations.  No recourse for
the payment of the principal of or Interest on any Note, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in this Indenture or in any
supplemental indenture or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder, employee, agent, officer, director or subsidiary, as such, past,
present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or

 

77

 

penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.

 

ARTICLE 16

CONVERSION OF NOTES

 

Section 16.01.  Right to Convert.

 

(a)                                  Subject
to and upon compliance with the provisions of this Indenture, prior to the
close of business on May 1, 2014, the holder of any Note shall have the
right, at such holder’s option, to convert the principal amount of the Note, or
any portion of such principal amount which is a multiple of $1,000, into fully
paid and non-assessable shares of Common Stock (as such shares shall then be
constituted) at the Conversion Rate in effect at such time, by surrender of the
Note so to be converted in whole or in part, together with any required funds,
under the circumstances described in this Section 16.01 and in the manner
provided in Section 16.02.  The Notes
shall be convertible only upon the occurrence of one of the following events:

 

(i)                       prior
to the close of business on May 1, 2009, and during any calendar quarter
commencing after June 30, 2004, if the Closing Sale Price of the Common Stock
exceeds 120% of the then-effective Conversion Price for at least 20 Trading
Days in the 30 consecutive Trading Day period ending on the last Trading Day of
the immediately preceding calendar quarter (it being understood for purposes of
this Section 16.01(a)(i) that the Conversion Price in effect at the close of
business on each of the 30 consecutive Trading Days should be used).  If this condition is satisfied, then the
Notes will become and remain convertible at any time thereafter at the option
of the Holder, through maturity;

 

(ii)                    after
May 1, 2009, if the Closing Sale Price of the Common Stock exceeds 120% of the
then-effective Conversion Price.  If
this condition is satisfied, then the Notes will become and remain convertible
at any time thereafter at the option of the Holder, through maturity;

 

(iii)                 during
the five Business Day (the “Measurement Period”) period immediately
following any five consecutive Trading Day period in which the Trading Price
per $1,000 principal amount of the Notes for each day of such Measurement
Period was less than 98% of the product of the Closing Sale Price and the
number of shares of Common Stock issuable upon conversion of $1,000 principal
amount of the Notes; provided that no conversion pursuant to
this clause (ii) may be made after May 1, 2009, if on any Trading Day during
the Measurement Period, the Closing Sale

 

78

 

Price is more
than 100% but less than 120% of the Conversion Price on such Trading Day;

 

(iv)                if
such Note has been called for redemption, at any time on or after the date the
notice of redemption has been given until the close of business on the second
Business Day immediately preceding the redemption date unless the Company
defaults in the payment of the redemption price; or

 

(v)                   as
provided in Section (b) of this Section 16.01.

 

The Trustee (or other conversion agent appointed by
the Company) shall, on behalf of the Company, determine on a daily basis during
the time period specified in Section 16.01(a)(i) and  (ii) whether the Notes shall be convertible as a result of the
occurrence of an event specified in clause (i) or  (ii) above and, if the Notes shall be so convertible, the Trustee
(or other conversion agent appointed by the Company) shall promptly deliver to
the Company and the Trustee (if the Trustee is not the conversion agent)
written notice thereof.  Whenever the
Notes shall become convertible pursuant to this Section 16.01, the Company or,
at the Company’s request, the Trustee in the name and at the expense of the
Company, shall notify the holders of the event triggering such convertibility
in the manner provided in Section 17.03, and the Company shall also publicly
announce such information and publish it on the Company’s web site.  Any notice so given shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice.

 

The Trustee (or other conversion agent appointed by
the Company) shall have no obligation to determine the Trading Price under this
Section 16.01 unless the Company has requested such a determination; and the
Company shall have no obligation to make such request unless a holder provides
it with reasonable evidence that the Trading Price per $1,000 principal amount
of Notes would be less than 98% of the product of the Closing Sale Price and
the number of shares of Common Stock issuable upon conversion of $1,000
principal amount of Notes.  If such
evidence is provided, the Company shall instruct the Trustee (or other
conversion agent) to determine the Trading Price of the Notes beginning on the
next Trading Day and on each successive Trading Day until the Trading Price per
$1,000 principal amount of Notes is greater than or equal to 98% of the product
of the Closing Sale Price and the number of shares issuable upon conversion of
$1,000 principal amount of the Notes; provided that the Trustee shall be under
no duty or obligation to make the calculations described in Section
16.01(a)(iii) hereof or to determine whether the Notes are convertible pursuant
to such section.  For the avoidance of
doubt, the Company shall make the calculations described in Section
16.01(a)(iii) using the Trading Price provided by the Trustee.

 

The Trustee shall be entitled at its sole discretion
to consult with the Company and to request the assistance of the Company in
connection with the Trustee’s duties and obligations pursuant to Section
16.01(a)(i), (ii) and (iii)

 

79

 

hereof (including
without limitation the calculation or determination of the Conversion Price,
the Closing Sale Price and the Trading Price), and the Company agrees, if
requested by the Trustee, to cooperate with, and provide assistance to, the
Trustee in carrying out its duties under this Section 16.01; provided
that nothing herein shall be construed to relieve the Trustee of its duties
pursuant to  Section 16.01(a)(i), (ii)
or (iii)  hereof.

 

(b)                                 In
addition, if:

 

(i)                       (A) the
Company distributes to all holders of its Common Stock rights or warrants
entitling them (for a period expiring within 45 days of such distribution) to
subscribe for or purchase shares of Common Stock, at a price per share less
than the average of the Closing Sale Price for the ten Trading Days immediately
preceding, but not including, the date such distribution is first publicly
announced by the Company, or (B) the Company distributes to all holders of
its Common Stock cash or other assets, debt securities or rights to purchase
its securities, where the Fair Market Value of such distribution per share of
Common Stock exceeds 5% of the Closing Sale Price on the Trading Day
immediately preceding the date such distribution is first publicly announced by
the Company, then, in either case, the Notes may be surrendered for conversion
at any time on and after the date that the Company gives notice to the holders
of such distribution, which shall be not less than 20 days prior to the
Ex-Dividend Time for such distribution, until the earlier of the close of
business on the Business Day immediately preceding, but not including, the
Ex-Dividend Time or the date the Company publicly announces that such
distribution will not take place; provided that neither any adjustment to
the Conversion Price will be made if the holder will otherwise participate in
such distribution without conversion nor will a holder of a Note have the
ability to convert pursuant to this Section 16.01(b); or

 

(ii)                    the
Company consolidates with or merges with or into another Person or is a party
to a binding share exchange or conveys, transfers, sells, leases or otherwise
disposes of all or substantially all of its properties and assets in each case
pursuant to which the Company’s Common Stock is converted into cash, securities
or other property, then the Notes may be surrendered for conversion at any time
from and after the date fifteen (15) days prior to the anticipated effective
date of the transaction and ending on and including the date fifteen (15) days
after the consummation of the transaction. 
If such transaction constitutes a Designated Event, the Notes may be
surrendered for conversion until the corresponding Designated Event Purchase
Date.  In such an event, a holder of
Notes may elect to exercise its option to require the Company to repurchase all
or a portion of such holder’s Notes. 
The Board of Directors shall determine the anticipated effective date of
the transaction, and such determination shall be conclusive and binding on the
holders and shall be

 

80

 

publicly
announced by the Company and posted on its web site not later than two Business
Days prior to such 15th day. 
If Notes are not surrendered pursuant to this paragraph for conversion
prior to the transaction, on the effective date of the transaction, the right
to convert the Notes into Common Stock will convert into a right to convert the
Notes into the kind and amount of cash, securities and other property that a
Noteholder would have received if such holder had converted such holder’s Notes
immediately prior to the transaction.

 

“Ex-Dividend
Time” means, with respect to any distribution on shares of Common
Stock, the first date on which the shares of Common Stock trade regular way on
the principal securities market on which the shares of Common Stock are then
traded without the right to receive such distribution.

 

(c)                                  A
Note in respect of which a holder is electing to exercise its option to require
the Company to repurchase such holder’s Notes upon a Designated Event pursuant
to Section 3.05, or at the option of the holder pursuant to Section 3.06, may
be converted only if such holder withdraws its election in accordance with
Section 3.05(c) or Section 3.08, respectively. 
A holder of Notes is not entitled to any rights of a holder of Common
Stock until such holder has converted his Notes to Common Stock, and only to
the extent such Notes are deemed to have been converted to Common Stock under
this Article 16.

 

Section 16.02.  Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for Interest or Dividends.

 

(a)                                  In
order to exercise the conversion privilege with respect to any Note in
certificated form, the Company must receive at the office or agency of the
Company maintained for that purpose or, at the option of such holder, the
Corporate Trust Office, such Note with the original or facsimile of a notice
(the “Conversion
Notice”) in the form set forth on the reverse of the Note, duly
completed and manually signed, together with such Notes duly endorsed for
transfer, accompanied by the funds, if any, required by Section 16.02(c).  Such notice shall also state the name or
names (with address or addresses) in which the certificate or certificates for
shares of Common Stock which shall be issuable on such conversion shall be
issued, and shall be accompanied by transfer or similar taxes, if required
pursuant to Section 16.07.

 

In order to
exercise the conversion privilege with respect to any interest in a Global
Note, the beneficial holder must complete, or cause to be completed, the
appropriate instruction form for conversion pursuant to the Depositary’s
book-entry conversion program, deliver, or cause to be delivered, by book-entry
delivery an interest in such Global Note, furnish appropriate endorsements and
transfer documents if required by the Company or the Trustee or conversion
agent, and pay the funds, if any, required by this Section 16.02 and any
transfer taxes if required pursuant to Section 16.07.

 

81

 

(b)                                 As
promptly as practicable after satisfaction of the requirements for conversion
set forth above, subject to compliance with any restrictions on transfer if
shares issuable on conversion are to be issued in a name other than that of the
Noteholder (as if such transfer were a transfer of the Note or Notes (or
portion thereof) so converted), the Company shall issue and shall deliver to
such Noteholder at the office or agency maintained by the Company for such
purpose pursuant to Section 6.02, a certificate or certificates for the number
of full shares of Common Stock issuable upon the conversion of such Note or
portion thereof as determined by the Company in accordance with the provisions
of this Article 16 and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, calculated by
the Company as provided in Section 16.03. 
In case any Note of a denomination greater than $1,000 shall be surrendered
for partial conversion, and subject to Section 2.03, the Company shall execute
and the Trustee shall authenticate and deliver to the holder of the Note so
surrendered, without charge to him, a new Note or Notes in authorized
denominations in an aggregate principal amount equal to the unconverted portion
of the surrendered Note.

 

Each
conversion shall be deemed to have been effected as to any such Note (or
portion thereof) on the date (the “Conversion Date”) on which the requirements
set forth above in this Section 16.02 have been satisfied as to such Note (or
portion thereof), and the Person in whose name any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become on said date the holder of record of the shares
represented thereby; provided that any such surrender on any
date when the stock transfer books of the Company shall be closed shall
constitute the Person in whose name the certificates are to be issued as the
record holder thereof for all purposes on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Rate in effect on the date upon which such Note shall be surrendered.

 

(c)                                  Any
Note or portion thereof surrendered for conversion during the period from the
close of business on the record date for any Interest payment date to the close
of business on the Business Day preceding such Interest payment date shall be
accompanied by payment, in immediately available funds or other funds
acceptable to the Company, of an amount equal to the Interest otherwise payable
on such Interest payment date on the principal amount being converted; provided
that no such payment need be made (1) if the Company has specified a redemption
date that is after a record date and prior to the next interest payment date,
(2) if the Company has specified a repurchase date following a Designated Event
that is during such period, or (3) to the extent of any overdue Interest at the
time of conversion with respect to such Note. 
Except as provided above in this Section 16.02, no payment or other
adjustment shall be made for Interest accrued on any Note converted or for
dividends on any shares issued upon the conversion of such Note as provided in
this Article 16.

 

82

 

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

 

The Company
agrees, and by acceptance of a beneficial interest in a Note each holder and
any beneficial owner of a Note shall be deemed to have agreed, to treat, for
United States federal income tax purposes, the Fair Market Value of the Common
Stock received upon a conversion of the Note (together with any cash payment in
lieu of fractional shares) as a contingent payment on the Note for purposes of
Treasury Regulation Section 1.1275-4 or any successor provision.

 

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

 

Section 16.03.  Cash Payments in Lieu of Fractional
Shares.  No fractional shares
of Common Stock or scrip certificates representing fractional shares shall be
issued upon conversion of Notes.   If
more than one Note shall be surrendered for conversion at one time by the same
holder, the number of full shares that shall be issuable upon conversion shall
be computed on the basis of the aggregate principal amount of the Notes (or
specified portions thereof to the extent permitted hereby) so surrendered.   If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current price thereof to the
holder of Notes.  The current price of a
share of Common Stock shall be the Closing Sale Price on the last Trading Day
immediately preceding the Conversion Date of the Notes (or specified portions
thereof).

 

Section 16.04.  Conversion Rate.  Each $1,000 principal amount of the Notes shall be
convertible into 26.5331 shares of Common Stock (herein called the “Conversion
Rate”), subject to adjustment as provided in this Article 16.

 

83

 

Section 16.05.  Adjustment of Conversion Rate.  The Conversion Rate shall be
adjusted from time to time by the Company as follows:

 

(a)                                  In
case the Company shall hereafter pay a dividend or make a distribution to all
holders of the outstanding Common Stock in shares of Common Stock, the
Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution by a fraction,

 

(i)                       the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding at the close of business on the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution plus the
total number of shares of Common Stock constituting such dividend or other
distribution; and

 

(ii)                    the
denominator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination,

 

such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination.  For
the purpose of this clause (a), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Company.  The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.  If any
dividend or distribution of the type described in this Section 16.05(a) is
declared but not so paid or made, the Conversion Rate shall again be adjusted
to the Conversion Rate that would then be in effect if such dividend or
distribution had not been declared.

 

(b)                                 In
case the Company shall issue rights or warrants to all holders of its
outstanding shares of Common Stock entitling them (for a period expiring within
forty-five (45) days after the date fixed for determination of stockholders
entitled to receive such rights or warrants) to subscribe for or purchase
shares of Common Stock at a price per share less than the Current Market Price
on the date fixed for determination of stockholders entitled to receive such
rights or warrants, the Conversion Rate shall be increased so that the same
shall equal the rate determined by multiplying the Conversion Rate in effect
immediately prior to the date fixed for determination of stockholders entitled
to receive such rights or warrants by a fraction,

 

(i)                       the
numerator of which shall be the number of shares of Common Stock outstanding on
the date fixed for determination of stockholders entitled to receive such
rights or warrants plus the total number of additional shares of Common Stock
offered for subscription or purchase, and

 

84

 

(ii)                    the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding at the close of business on the date fixed for determination of
stockholders entitled to receive such rights or warrants plus the number of
shares that the aggregate offering price of the total number of shares so
offered would purchase at such Current Market Price.

 

Such
adjustment shall be successively made whenever any such rights or warrants are
issued, and shall become effective immediately after the opening of business on
the day following the date fixed for determination of stockholders entitled to
receive such rights or warrants.  To the
extent that shares of Common Stock are not delivered after the expiration of
such rights or warrants, the Conversion Rate shall be readjusted to the
Conversion Rate that would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually delivered.  If such rights or warrants are not so
issued, the Conversion Rate shall again be adjusted to be the Conversion Rate
that would then be in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been fixed.  In determining whether any rights or
warrants entitle the holders to subscribe for or purchase shares of Common
Stock at less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received by the Company for such rights or warrants
and any amount payable on exercise or conversion thereof, the value of such
consideration, if other than cash, to be determined by the Board of Directors.

 

(c)                                  In
case outstanding shares of Common Stock shall be subdivided into a greater
number of shares of Common Stock, the Conversion Rate in effect at the opening
of business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.

 

(d)                                 In
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock shares of any class of capital stock of the Company or
evidences of its indebtedness or assets (including securities, but excluding
any rights or warrants referred to in Section 16.05(b), and excluding any
dividend or distribution (x) paid exclusively in cash or (y) referred to in
Section 16.05(a) (any of the foregoing hereinafter in this Section 16.05(d))
called the “Securities”)), then, in each such case, the Conversion Rate
shall be increased so that the same shall be equal to the rate determined by
multiplying the Conversion Rate in effect on the Record Date with respect to
such distribution by a fraction,

 

85

 

(i)                       the
numerator of which shall be the Current Market Price on such Record Date; and

 

(ii)                    the
denominator of which shall be the Current Market Price on such Record Date less
the Fair Market Value (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a resolution of the Board
of Directors) on the Record Date of the portion of the Securities so
distributed applicable to one share of Common Stock,

 

such adjustment to become
effective immediately prior to the opening of business on the day following
such Record Date; provided that if the then Fair Market Value (as so
determined) of the portion of the Securities so distributed applicable to one
share of Common Stock is equal to or greater than the Current Market Price on
the Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that each Noteholder shall have the right to receive upon conversion
the amount of Securities such holder would have received had such holder
converted each Note on the Record Date. 
If such dividend or distribution is not so paid or made, the Conversion
Rate shall again be adjusted to be the Conversion Rate that would then be in
effect if such dividend or distribution had not been declared.  If the Board of Directors determines the Fair
Market Value of any distribution for purposes of this Section 16.05(d) by
reference to the actual or when issued trading market for any securities, it
must in doing so consider the prices in such market over the same period used
in computing the Current Market Price on the applicable Record Date.

 

If the
dividend or distribution requiring an adjustment pursuant to this clause (d)
consists of capital stock of any class or series, or similar equity interests,
of or relating to a Subsidiary or other business unit of the Company, for
purposes of making such adjustment, (i) the Current Market Price shall be
determined as of the date (the “Ex-Dividend Date”) on which “ex-dividend
trading” commences for such distribution on the NASDAQ National Market or such
other national or regional exchange or market on which such securities are then
listed or quoted, based on the average of the Closing Sale Prices of the Common
Stock for the ten (10) Trading Days commencing on and including the fifth
Trading Day after the Ex-Dividend Date and (ii) the Fair Market Value of such
dividend or distribution shall equal the number of securities distributed in
respect of each share of Common Stock multiplied by the average of the closing
sale prices of those securities distributed for the ten (10) Trading Days
commencing on and including the fifth Trading Day after the Ex-Dividend Date.

 

Rights or
warrants distributed by the Company to all holders of Common Stock entitling
the holders thereof to subscribe for or purchase shares of the Company’s
capital stock (either initially or under certain circumstances), which rights
or warrants, until the occurrence of a specified event or events (“Trigger
Event”): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of

 

86

 

Common Stock, shall be deemed not to have
been distributed for purposes of this Section 16.05 (and no adjustment to the
Conversion Rate under this Section 16.05 will be required) until the occurrence
of the earliest Trigger Event, whereupon such rights and warrants shall be
deemed to have been distributed and an appropriate adjustment (if any is
required) to the Conversion Rate shall be made under this Section 16.05.  If any such right or warrant, including any
such existing rights or warrants distributed prior to the date of this
Indenture, are subject to events, upon the occurrence of which such rights or
warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
holders thereof).  In addition, in the
event of any distribution (or deemed distribution) of rights or warrants, or
any Trigger Event or other event (of the type described in the preceding
sentence) with respect thereto that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Rate under this
Section 16.05 was made, (1) in the case of any such rights or warrants that
shall all have been redeemed or repurchased without exercise by any holders
thereof, the Conversion Rate shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case
may be, as though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder or holders of Common Stock
with respect to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such rights or warrants that
shall have expired or been terminated without exercise by any holders thereof,
the Conversion Rate shall be readjusted as if such rights and warrants had not
been issued.

 

For purposes
of this Section 16.05(d) and Section 16.05(a) and (b), any dividend or
distribution to which this Section 16.05(d) is applicable that also includes
shares of Common Stock, or such rights or warrants to subscribe for or purchase
shares of Common Stock of the type described in Section 16.05(b) (or both),
shall be deemed instead to be (1) a dividend or distribution of the evidences
of indebtedness, assets or shares of capital stock other than such shares of
Common Stock or rights or warrants (and any Conversion Rate adjustment required
by this Section 16.05(d) with respect to such dividend or distribution shall
then be made) immediately followed by (2) a dividend or distribution of such
shares of Common Stock or such rights or warrants (and any further Conversion
Rate adjustment required by Sections 16.05(a) and 16.05(b) with respect to such
dividend or distribution shall then be made), except (A) the Record Date of
such dividend or distribution shall be substituted as “the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution”, “the date fixed for the determination of stockholders entitled
to receive such rights or warrants” and “the date fixed for such determination”
within the meaning of Section 16.05(a) and 16.05(b) and (B) any shares of

 

87

 

Common Stock included in such dividend or
distribution shall not be deemed “outstanding at the close of business on the
date fixed for such determination” within the meaning of Section 16.05(a).

 

(e)                                  In
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock cash (excluding any dividend or distribution in connection
with the liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, or any quarterly cash dividend on its Common Stock to
the extent that the aggregate cash dividend paid per share of Common Stock in
any quarter does not exceed $0.08 (the “Dividend Threshold Amount”)), then, in such
case, the Conversion Rate shall be increased so that the same shall equal the
rate determined by multiplying the Conversion Rate in effect immediately prior
to the close of business on such Record Date by a fraction,

 

(i)                       the
numerator of which shall be the Current Market Price on such Record Date minus
the Dividend Threshold Amount; and

 

(ii)                    the
denominator of which shall be the Current Market Price on such Record Date less
the amount of cash so distributed applicable to one share of Common Stock,

 

such adjustment to be effective
immediately prior to the opening of business on the day following the record
date;
provided that if the portion of the cash so distributed applicable
to one share of Common Stock is equal to or greater than the Current Market
Price on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Noteholder shall have the right to receive
upon conversion the amount of cash such holder would have received had such holder
converted each Note on the Record Date. 
If such dividend or distribution is not so paid or made, the Conversion
Rate shall again be adjusted to be the Conversion Rate that would then be in
effect if such dividend or distribution had not been declared.  The Dividend Threshold Amount shall be
adjusted whenever the Conversion Rate is adjusted by multiplying the Dividend
Threshold Amount by a fraction, the numerator of which is the Conversion Rate
in effect immediately prior to the adjustment thereof and the denominator of
which is the Conversion Rate as so adjusted. 
If an adjustment is required to be made as set forth in this Section
16.05(e) above as a result of a distribution that is not a regular quarterly
dividend, the Dividend Threshold Amount shall be deemed to be zero.

 

(f)                                    In
case a tender or exchange offer made by the Company or any Subsidiary for all
or any portion of the Common Stock shall expire and such tender or exchange
offer (as amended upon the expiration thereof) shall require the payment to
stockholders of consideration per share of Common Stock having a Fair Market
Value (as determined by the Board of Directors, whose determination shall be
conclusive, and described in a resolution of the Board of Directors) that as of
the last time (the “Expiration Time”) tenders or exchanges may
be made pursuant to such tender or exchange offer (as it may be amended)

 

88

 

exceeds the Closing Sale Price of a share of
Common Stock on the Trading Day next succeeding the Expiration Time, the
Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to
the Expiration Time by a fraction,

 

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

 

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

 

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

 

(g)                                 For
purposes of this Section 16.05, the following terms shall have the meaning
indicated:

 

(i)                       “Current
Market Price” shall mean the average of the daily Closing Sale
Prices per share of Common Stock for the ten consecutive Trading Days ending on
the earlier of such date of determination and the day before the “ex”
date with respect to the issuance, distribution, subdivision or combination
requiring such computation immediately prior to the date in question.  For purpose of this clause (i), the term “ex”
date, (1) when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades, regular way, on the relevant
exchange or in the relevant market from which the Closing Sale Price was
obtained without the right to receive such issuance or distribution, and (2)
when used with respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades, regular way, on
such exchange or in such market after the time at which such subdivision or
combination becomes effective.

 

89

 

If another issuance, distribution, subdivision or combination to which
Section 16.05 applies occurs during the period applicable for calculating “Current
Market Price” pursuant to the definition in the preceding paragraph,
“Current
Market Price” shall be calculated for such period in a manner
determined by the Board of Directors to reflect the impact of such issuance,
distribution, subdivision or combination on the Closing Sale Price of the
Common Stock during such period.

 

(ii)                    “Fair Market
Value” shall mean the amount which a willing buyer would pay a
willing seller in an arm’s-length transaction.

 

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

 

(iv)                “Trading Day”
shall mean a day during which trading in securities occurs on the New York
Stock Exchange or, if the Common Stock is not listed on the New York Stock
Exchange, on the principal national or regional securities exchange on which
the Common Stock is then listed or, if the Common Stock is not listed on a
national or regional securities exchange, on the principal market on which the
Common Stock is then traded.

 

(h)                                 The
Company may make such increases in the Conversion Rate, in addition to those
required by Section 16.05(a), (b), (c), (d), (e) or (f) as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes.

 

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

 

90

 

(i)                                     No
adjustment in the Conversion Rate shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in such
rate;
provided that any adjustments that by reason of this Section
16.05(i) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. 
All calculations under this Article 16 shall be made by the Company and
shall be made to the nearest cent or to the nearest one-ten thousandth
(1/10,000) of a share, as the case may be. 
No adjustment need be made for rights to purchase Common Stock pursuant
to a Company plan for reinvestment of dividends or interest or for any issuance
of Common Stock or convertible or exchangeable securities or rights to purchase
Common Stock or convertible or exchangeable securities.  To the extent the Notes become convertible
into cash, assets, property or securities (other than capital stock of the
Company), no adjustment need be made thereafter as to the cash, assets, property
or such securities.  Interest will not
accrue on any cash into which the Notes are convertible.

 

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

 

(k)                                  In
any case in which this Section 16.05 provides that an adjustment shall become
effective immediately after (1) a Record Date for an event, (2) the date fixed
for the determination of stockholders entitled to receive a dividend or
distribution pursuant to Section 16.05(a), (3) a date fixed for the
determination of stockholders entitled to receive rights or warrants pursuant
to Section 16.05(b) or (4) the Expiration Time for any tender or exchange offer
pursuant to Section 16.05(f) (each a “Determination Date”), the Company may elect
to defer until the occurrence of the applicable Adjustment Event (as
hereinafter defined) (x) issuing to the holder of any Note converted after such
Determination Date and before the occurrence of such Adjustment Event, the
additional shares of Common Stock or other securities issuable upon such
conversion by reason of the adjustment required by such Adjustment Event over
and above the Common Stock issuable upon such conversion before giving effect
to such adjustment and (y) paying to such holder any amount in cash in lieu of
any fraction pursuant to

 

91

 

Section 16.03.  For purposes of this Section 16.05(k), the term “Adjustment
Event” shall mean:

 

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

 

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

 

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

 

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

 

(l)                                     For
purposes of this Section 16.05, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock. 
The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.

 

Section 16.06.  Effect of Reclassification, Consolidation,
Merger or Sale.  If any of
the following events occur, namely (i) any reclassification or change of the
outstanding shares of Common Stock (other than a subdivision or combination to
which Section 16.05(c) applies), (ii) any consolidation, merger or combination
of the Company with another Person as a result of which holders of Common Stock
shall be entitled to receive stock, other securities or other property or
assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of all or substantially all of the properties
and assets of the Company to any other Person as a result of which holders of
Common Stock shall be entitled to receive stock, other securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing Person, as the case
may be, shall execute with the Trustee a supplemental indenture (which shall
comply with the Trust Indenture Act as in force at the date of execution of
such supplemental indenture) providing that each Note shall be convertible into
the kind and amount of shares of stock, other securities or other property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Notes (assuming, for
such purposes, a sufficient number of authorized shares of Common Stock are
available to convert all such Notes) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or
conveyance assuming such holder of Common Stock did not exercise his rights of
election, if any, as to the kind or amount of stock, other securities or other
property or assets (including cash) receivable upon such reclassification,
change,

 

92

 

consolidation, merger, combination, sale or
conveyance (provided
that, if the kind or amount of stock, other securities or other property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance is not the same for each
share of Common Stock in respect of which such rights of election shall not
have been exercised (each, a “Non-Electing Share”), then for the purposes
of this Section 16.06 the kind and amount of stock, other securities or other
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance for each
Non-Electing Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-Electing Shares).  Such supplemental indenture shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 16.

 

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

 

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

 

If this Section
16.06 applies to any event or occurrence, Section 16.05 shall not apply.

 

Section 16.07.  Taxes on Shares Issued.  The issue of stock certificates
on conversions of Notes shall be made without charge to the converting
Noteholder for any documentary, stamp or similar issue or transfer tax in
respect of the issue thereof.  The
Company shall not, however, be required to pay any such tax which may be
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than that of the holder of any Note converted, and the
Company shall not be required to issue or deliver any such stock certificate
unless and until the Person or Persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

 

Section 16.08.  Reservation of Shares; Shares to Be Fully
Paid; Compliance with Governmental Requirements; Listing of Common Stock.  The Company shall provide, free
from preemptive rights, out of its authorized but unissued shares or shares
held in treasury, sufficient shares of Common Stock to provide for the
conversion of the Notes from time to time as such Notes are presented for
conversion.

 

Before taking
any action which would cause an adjustment increasing the Conversion Rate to an
amount that would cause the Conversion Price to be

 

93

 

reduced below the then par value, if any, of
the shares of Common Stock issuable upon conversion of the Notes, the Company
will take all corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue shares of
such Common Stock at such adjusted Conversion Rate.

 

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

 

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

 

The Company
further covenants that, subject to the provisions of the Registration Rights
Agreement, if at any time the Common Stock shall be listed on the New York
Stock Exchange or any other national securities exchange or on the Nasdaq
National Market or any other automated quotation system, the Company will, if
permitted by the rules of such exchange or automated quotation system, list and
keep listed, so long as the Common Stock shall be so listed on such exchange or
automated quotation system, all Common Stock issuable upon conversion of the
Notes;
provided that if the rules of such exchange or automated quotation
system permit the Company to defer the listing of such Common Stock until the
first conversion of the Notes into Common Stock in accordance with the
provisions of this Indenture, the Company covenants to list such Common Stock
issuable upon conversion of the Notes in accordance with the requirements of such
exchange or automated quotation system at such time.

 

Section 16.09.  Responsibility of Trustee.  The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any Noteholder to determine the Conversion Rate or whether any facts exist
which may require any adjustment of the Conversion Rate, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture provided
to be employed, in making the same.  The
Trustee and any other conversion agent shall not be accountable with respect to
the validity or value (or the kind or amount) of any shares of Common Stock, or
of any securities or property, which may at any time be issued or delivered
upon the conversion of any Note; and the Trustee and any other conversion agent
make no representations with respect thereto. 
Neither the Trustee nor any conversion agent shall be responsible for
any failure of the

 

94

 

Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Note for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Article 16.  Without limiting
the generality of the foregoing, neither the Trustee nor any conversion agent
shall be under any responsibility to determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to Section 16.06
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by Noteholders upon the conversion of
their Notes after any event referred to in such Section 16.06 or to any
adjustment to be made with respect thereto, but, subject to the provisions of
Section 9.01, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officer’s Certificate
(which the Company shall be obligated to file with the Trustee prior to the
execution of any such supplemental indenture) with respect thereto.

 

Section 16.10.  Notice to Holders Prior to Certain Actions.  In case:

 

(a)                                  the
Company shall declare a dividend (or any other distribution) on its Common
Stock that would require an adjustment in the Conversion Rate pursuant to
Section 16.05; or

 

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

 

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

 

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

 

the Company shall cause to be
filed with the Trustee and to be mailed to each Noteholder at his address
appearing on the Note Register provided for in Section 2.05 of this Indenture,
as promptly as possible but in any event at least ten (10) days prior to the
applicable date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights
or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution
or rights are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common

 

95

 

Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.  Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of such dividend, distribution, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up.

 

Section 16.11.  Stockholder Rights Plans.  Each share of Common Stock issued
upon conversion of Notes pursuant to this Article 16 shall be entitled to
receive the appropriate number of rights, if any, and the certificates
representing the Common Stock issued upon such conversion shall bear such
legends, if any, in each case as may be provided by the terms of any
shareholder rights plan adopted by the Company, as the same may be amended from
time to time.  If at the time of
conversion, however, the rights have separated from the shares of Common Stock
in accordance with the provisions of the applicable shareholder rights
agreement so that the holders of the Notes would not be entitled to receive any
rights in respect of Common Stock issuable upon conversion of the Notes, the
conversion rate will be adjusted in accordance with Section 16.05(d) treating
all rights previously issued as Securities for purposes of such adjustment,
subject to readjustment in the event of the expiration, termination or
redemption of the rights.

 

ARTICLE 17

MISCELLANEOUS PROVISIONS

 

Section 17.01.  Provisions Binding on Company’s
Successors.  All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.

 

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

 

Section 17.03.  Addresses for Notices, Etc.  Any notice or demand which by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box or sent by telecopier transmission addressed as follows: to Lithia
Motors, Inc., 360 East Jackson Street, Medford, Oregon 97501, Telecopier
No. 541-776-6861, Attention: Chief Financial Officer, with a copy to Foster
Pepper Tooze LLP, 601 SW Second Avenue, Suite 1800, Portland, Oregon 97204,
Telecopier No. 503-221-1510, Attention: Kenneth E. Roberts.  Any notice, direction, request or

 

96

 

demand hereunder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given
or served by being deposited, postage prepaid, by registered or certified mail
in a post office letter box or sent by telecopier transmission addressed as
follows: U.S. Bank National Association, 555 Southwest Oak Street, PL-6,
Portland, Oregon 97204, Telecopier No. 503-275-5738, Attention: Corporate Trust
Services.

 

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

 

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

 

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

 

Section 17.04.  Governing Law.  This Indenture and each Note shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of the State of New York,
without regard to conflicts of laws principles thereof.

 

Section 17.05.  Evidence of Compliance with Conditions
Precedent; Certificates to Trustee.  Upon
any application or demand by the Company to the Trustee to take any action
under any of the provisions of this Indenture, the Company shall furnish to the
Trustee an Officer’s Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with, and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.

 

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

 

97

 

Section 17.06.  Legal Holidays.  In any case in which the date of maturity of Interest
on or principal of the Notes or the redemption or repurchase date of any Note
will not be a Business Day, then payment of such Interest on or principal of
the Notes need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the redemption or repurchase date, and no Interest shall accrue for the
period from and after such date.

 

Section 17.07.  Trust Indenture Act.  This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided that unless otherwise required by law,
notwithstanding the foregoing, this Indenture and the Notes issued hereunder
shall not be subject to the provisions of subsections (a)(1), (a)(2), and
(a)(3) of Section 314 of the Trust Indenture Act as now in effect or as
hereafter amended or modified; provided further that this Section 17.07
shall not require this Indenture or the Trustee to be qualified under the Trust
Indenture Act prior to the time such qualification is in fact required under
the terms of the Trust Indenture Act, nor shall it constitute any admission or
acknowledgment by any party to this Indenture that any such qualification is
required prior to the time such qualification is in fact required under the
terms of the Trust Indenture Act.  If
any provision hereof limits, qualifies or conflicts with another provision
hereof which is required to be included in an indenture qualified under the
Trust Indenture Act, such required provision shall control.

 

Section 17.08.  No Security Interest Created.  Nothing in this Indenture or in
the Notes, expressed or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect, in any jurisdiction in which property of the
Company or its subsidiaries is located.

 

Section 17.09.  Benefits of Indenture.  Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto, any paying agent, any authenticating agent, any Note Registrar and
their successors hereunder and the holders of Notes any benefit or any legal or
equitable right, remedy or claim under this Indenture.

 

Section 17.10.  Table of Contents, Headings, Etc.  The table of contents and the
titles and headings of the Articles and Sections of this Indenture have been inserted
for convenience of reference only, are not to be considered a part hereof, and
shall in no way modify or restrict any of the terms or provisions hereof.

 

Section 17.11.  Authenticating Agent.  The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection
with the original issuance thereof and transfers and exchanges of Notes
hereunder,

 

98

 

including under Sections 2.04, 2.05, 2.06,
2.07, 3.03, 3.05, 3.06, 3.10 and 16.02, as fully to all intents and purposes as
though the authenticating agent had been expressly authorized by this Indenture
and those Sections to authenticate and deliver Notes.  For all purposes of this Indenture, the authentication and
delivery of Notes by the authenticating agent shall be deemed to be
authentication and delivery of such Notes “by the Trustee” and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent
shall be deemed to satisfy any requirement hereunder or in the Notes for the
Trustee’s certificate of authentication. 
Such authenticating agent shall at all times be a Person eligible to
serve as trustee hereunder pursuant to Section 9.09.

 

Any
corporation into which any authenticating agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, consolidation or conversion to which any authenticating agent shall be
a party, or any corporation succeeding to the corporate trust business of any
authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 17.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.

 

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

 

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

 

The provisions
of Sections 9.02, 9.03, 9.04 and 10.03 and this Section 17.11 shall be
applicable to any authenticating agent.

 

Section 17.12.  Execution in Counterparts.  This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

 

Section 17.13.  Severability.  In case any provision in this Indenture or in the
Notes shall be invalid, illegal or unenforceable, then (to the extent permitted

 

99

 

by law) the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

The Trustee
hereby accepts the trusts in this Indenture declared and provided, upon the
terms and conditions herein above set forth.

 

100

 

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

 

	
   

  	
  LITHIA
  MOTORS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey B. DeBoer

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey B.
  DeBoer

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice
  President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. Bank
  National Association, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Linda A. McConkey

  
	
   

  	
   

  	
  Name:

  	
  Linda A.
  McConkey

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

EXHIBIT A

 

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

 

THE NOTE EVIDENCED HEREBY HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A “QUALIFIED
INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT); (2)
AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE
TO SALES OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE EXCEPT (A) TO LITHIA MOTORS,
INC., OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND THAT CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(D) ABOVE), IT WILL FURNISH TO U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (4) AGREES THAT IT

 

 

WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND
WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO
CLAUSE 2(D) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(k) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTION.

 

THE OBLIGATIONS EVIDENCED HEREBY ARE
SUBORDINATED IN THE MANNER AND TO THE EXTENT SET FORTH IN ARTICLE 5 OF THE
INDENTURE TO THE OBLIGATIONS (INCLUDING INTEREST) OWED BY THE COMPANY TO ALL SENIOR
INDEBTEDNESS; AND EACH HOLDER HEREOF BY ITS ACCEPTANCE HEREOF SHALL BE BOUND BY
THE PROVISIONS OF THE SUBORDINATION AS SET FORTH IN SAID ARTICLE 5 OF THE
INDENTURE.

 

A2

 

LITHIA MOTORS, INC.

 

2.875% CONVERTIBLE SENIOR SUBORDINATED NOTE DUE 2014

 

CUSIP: 
[                       ]

 

	
  No. 1

  	
   

  	
  $                             

  

 

Lithia Motors, Inc., a corporation duly organized and validly existing
under the laws of the State of Oregon (herein called the “Company”, which term includes
any successor corporation under the Indenture referred to on the reverse
hereof), for value received hereby promises to pay to Cede & Co. or its
registered assigns, the principal sum set forth on Schedule I hereto on May 1,
2014 at the office or agency of the Company maintained for that purpose in
accordance with the terms of the Indenture, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts, and to pay Interest, semiannually on
May 1 and November 1 of each year, commencing November 1, 2004, on said
principal sum, in like coin or currency, at the rate per annum of 2.875%, from
the May 1 or November 1, as the case may be, next preceding the date of this
Note to which Interest has been paid or duly provided for, unless the date
hereof is a date to which Interest has been paid or duly provided for, in which
case from the date of this Note, or unless no Interest has been paid or duly
provided for on the Notes, in which case from May 3, 2004, until payment of
said principal sum has been made or duly provided for.  Contingent Interest, if any, will accrue for
any six-month period and be payable on the applicable Interest payment date to
the person in whose name this Note is registered on the corresponding record
date.  Except as otherwise provided in
the Indenture, the Interest payable on this Note on any May 1 or November 1
will be paid to the Person entitled thereto as it appears in the Note Register
at the close of business on the record date, which shall be the April 15 or
October 15 (whether or not a Business Day) next preceding such May 1 or
November 1, as provided in the Indenture; provided that any such Interest not
punctually paid or duly provided for shall be payable as provided in Section
8.01 of the Indenture.   Interest on the
Notes shall be computed on the basis of a 360-day year of twelve 30-day months.

 

The Company
shall pay Interest (i) on any Notes in certificated form by check mailed to the
address of the Person entitled thereto as it appears in the Note Register; provided
that the holder of Notes with an aggregate principal amount in excess of
$2,000,000 shall, at the written election of such holder, be paid by wire
transfer of immediately available funds or (ii) on any Global Note by wire
transfer of immediately available funds to the account of the Depositary or its
nominee.

 

The Company
promises to pay interest on overdue principal and (to the extent that payment
of such interest is enforceable under applicable law) Interest at the rate
borne by the Notes, plus 1% per annum.

 

A3

 

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

 

This Note
shall be deemed to be a contract made under the laws of the State of New York,
and for all purposes shall be construed in accordance with and governed by the
laws of the State of New York, without regard to conflicts of laws principles
thereof.

 

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

 

Reference is
made to the further provisions of this Note set forth on the reverse hereof,
which further provisions shall, for all purposes, have the same effect as if
set forth here.

 

Unless the
certificate of authentication hereon has been executed by the Trustee referred
to on the reverse hereof by manual signature, this Note shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.

 

A4

 

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

 

	
   

  	
  LITHIA
  MOTORS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

A5

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes described in the within-named Indenture.

 

Dated:

 

 

U.S. Bank National Association, as Trustee

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  

 

A6

 

FORM OF REVERSE OF NOTE

 

LITHIA MOTORS, INC.

 

2.875% CONVERTIBLE SENIOR SUBORDINATED NOTE DUE 2014

 

This Note is one of a duly authorized issue of Notes of the Company,
designated as its 2.875% Convertible Senior Subordinated Notes Due 2014 (herein
called the “Notes”), limited in aggregate principal amount to $85,000,000
or, if the Company sells an additional $15,000,000 principal amount of its
Notes pursuant to the option of the Initial Purchasers granted pursuant to the
Purchase Agreement dated as of April 27, 2004 between the Company and the
Initial Purchasers, limited in the aggregate principal amount to $100,000,000
(except pursuant to Sections 2.05, 2.06, 2.10, 3.03, 3.05, 3.06, 3.10 and 16.02
hereof), issued and to be issued under and pursuant to an Indenture dated as of
May 4, 2004 (herein called the “Indenture”), between the Company and U.S.
Bank National Association, as trustee (herein called the “Trustee”), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the Notes.

 

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

 

The
indebtedness evidenced by the Notes is, to the extent and in the manner
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full in cash (or as otherwise agreed) of all Senior
Indebtedness of the Company.  Any holder
by accepting this Note agrees to and shall be bound by the subordination
provisions and authorizes the Trustee to give them effect and appoints the
Trustee its attorney-in-fact for such purposes.  In addition to all other rights of Senior Indebtedness described
in the Indenture, the Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any terms of any
instrument relating to the Senior Indebtedness or any extension or renewal of
the Senior Indebtedness or increase in amount thereof.

 

The Indenture
contains provisions permitting the Company and the Trustee, with the consent of
the holders of at least a majority in aggregate principal amount of the Notes
at the time outstanding, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in any manner the
rights of the holders of the Notes, subject to the exceptions set

 

A7

 

forth in Section 12.02 of the Indenture.  Subject to the provisions of the Indenture,
the holders of a majority in aggregate principal amount of the Notes at the
time outstanding may on behalf of the holders of all of the Notes waive any
past, current or future breach of any provision of the Indenture, default or
Event of Default, in each case subject to the exceptions set forth in the
Indenture.  Any such consent or waiver
by the holder of this Note (unless revoked as provided in the Indenture) shall
be conclusive and binding upon such holder and upon all future holders and
owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes.

 

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

 

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

 

The Notes are
issuable in fully registered form, without coupons, in denominations of $1,000
principal amount and any multiple of $1,000. 
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in
exchange thereof, subject to the limitations provided in the Indenture, without
charge except for any tax, assessment or other governmental charge imposed in
connection therewith.

 

At any time on
or after May 6, 2009, and prior to maturity, the Notes may be redeemed at the
option of the Company, in whole or in part, upon mailing a notice of such
redemption not less than 30 days but not more than 60 days before the
redemption date to the holders of Notes at their last registered addresses, all
as provided in the Indenture, at a cash redemption price equal to 100% of the
principal amount of the Notes being redeemed and accrued and unpaid Interest,
to, but excluding, the redemption date; provided that if the redemption date falls
after a record date and on or prior to the corresponding Interest payment date,
then accrued and unpaid Interest to, but excluding, the redemption date shall
be paid on such Interest payment date to the holders of record of such Notes on
the applicable record date instead of to the holders surrendering such Notes for
redemption on such date.

 

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

 

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

 

A8

 

If a
Designated Event occurs at any time prior to maturity of the Notes, the Company
shall become obligated to repurchase, at the option of the holder, all or any
portion of this Note held by such holder of this Note may require the Company
to repurchase this Note at a redemption price equal to 100% of the principal
amount hereof, together with Interest to (but excluding) the redemption date,
as provided in Article 3 of the Indenture.

 

Subject to the terms and conditions of the Indenture,
the Company shall become obligated to purchase, at the option of the holder,
all or any portion of the Notes held by such holder on May 1, 2009, in
multiples of $1,000 at a cash repurchase price of 100% of the principal amount,
plus any accrued and unpaid Interest on such Note up to, but excluding, the
Repurchase Date.  To exercise such
right, a holder shall deliver to the Company such Note with the form entitled
“Repurchase Notice” on the reverse thereof duly completed, together with the
Note, duly endorsed for transfer, at any time from the opening of business on
the date that is 20 Business Days prior to such Repurchase Date until the close
of business on the date that is two Business Days prior to the Repurchase Date,
and shall deliver the Notes to the Trustee (or other paying agent appointed by
the Company) as set forth in the Indenture.

 

Holders have the right to withdraw any Designated
Event Repurchase Notice or Repurchase Notice, as the case may be, by delivering
to the Trustee (or other paying agent appointed by the Company) a written
notice of withdrawal up to the close of business on the Designated Event
Repurchase Date or the Repurchase Date, as the case may be, all as provided in
the Indenture.

 

If money sufficient to pay the repurchase price of all
Notes or portions thereof to be purchased as of the Designated Event Repurchase
Date or the Repurchase Date, as the case may be, is deposited with the Trustee
(or other paying agent appointed by the Company), on the Designated Event
Repurchase Date or the Repurchase Date, as the case may be, Interest will cease
to accrue on such Notes (or portions thereof) immediately after such Designated
Event Repurchase Date or Repurchase Date, and the holder thereof shall have no
other rights as such other than the right to receive the repurchase price upon
surrender of such Note.

 

Subject to the
occurrence of certain events and in compliance with the provisions of the
Indenture, prior to the final maturity date of the Notes, the holder hereof has
the right, at its option, to convert each $1,000 principal amount of the Notes
into 26.5331 shares (the “Conversion Rate”) of the Company’s Common
Stock, as such shares shall be constituted at the date of conversion and
subject to adjustment from time to time as provided in the Indenture, upon
surrender of this Note with the form entitled “Conversion Notice” on the
reverse thereof duly completed, to the Company at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, or at the option of such holder, the Corporate Trust Office, and,
unless the shares issuable on conversion are to be issued in the same name as
this Note, duly

 

A9

 

endorsed by, or accompanied by instruments of
transfer in form satisfactory to the Company duly executed by, the holder or by
his duly authorized attorney.  The
Company will notify the holder thereof of any event triggering the right to
convert the Notes as specified above in accordance with the Indenture.

 

No adjustment
in respect of Interest on any Note converted or dividends on any shares issued
upon conversion of such Note will be made upon any conversion except as set
forth in the next sentence.  If this
Note (or portion hereof) is surrendered for conversion during the period from
the close of business on any record date for the payment of Interest to the
close of business on the Business Day preceding the following Interest payment
date, this Note (or portion hereof being converted) must be accompanied by
payment, in immediately available funds or other funds acceptable to the
Company, of an amount equal to the Interest otherwise payable on such Interest
payment date on the principal amount being converted; provided that no such
payment shall be required (1) if the Company has specified a redemption date
following a Designated Event that is after a record date and on or prior to the
next Interest payment date or (2) to the extent of any overdue Interest at the time
of conversion with respect to this Note.

 

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

 

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

 

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

 

No recourse
for the payment of the principal of or Interest on this Note, or for any claim
based hereon or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture or any
supplemental indenture or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
shareholder, employee, agent, officer or director or subsidiary, as such, past,

 

A10

 

present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by acceptance hereof and as part of the consideration for the
issue hereof, expressly waived and released.

 

For purposes of sections 1272, 1273 and 1275 of the
Internal Revenue Code of 1986, as amended, this Note is being issued with Tax
Original Issue Discount and the issue date of this Note is May 4, 2004.  In addition, this Note is subject to the
United States federal income tax regulations governing contingent payment debt
instruments.  For purposes of sections
1272, 1273 and 1275 of the Internal Revenue Code, the comparable yield of this
Note is 9.0% per year, compounded semi-annually (which will be treated as the
yield to maturity for United States federal income tax purposes).

 

The Company agrees, and by acceptance of a beneficial
interest in a Note each holder and any beneficial owner of a Note shall be
deemed to have agreed, to treat the Note as indebtedness of the Company for
United States federal income tax purposes that is subject to Treasury
Regulation Section 1.1275-4 or any successor provision (the “contingent payment
regulations”) and to be bound (in the absence of an administrative
determination or judicial ruling to the contrary) by the Company’s
determination of the comparable yield and the projected payment schedule within
the meaning of the contingent payment regulations.  A holder of Notes may obtain the issue price, amount of Tax
Original Issue Discount, issue date, yield to maturity, comparable yield and
projected payment schedule for the Notes, determined by the Company pursuant to
the contingent payment regulations, by submitting a written request for it to
the Company at the following address: 
Lithia Motors, Inc., 360 East Jackson Street, Medford, Oregon 97501,
Attention: Chief Financial Officer.

 

This Note shall be deemed to be a contract made under
the laws of New York, and for all purposes shall be construed in accordance
with the laws of New York, without regard to conflicts of laws principles
thereof.

 

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

 

A11

 

ABBREVIATIONS

 

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

 

	
  TEN COM -

  	
   

  	
  as tenants
  in common

  	
   

  	
  UNIF GIFT
  MIN ACT -       Custodian 

  
	
  TEN ENT -

  	
   

  	
  as tenant by
  the entireties

  	
   

  	
  (Cust)(Minor)

  
	
  JT TEN -

  	
   

  	
  as joint
  tenants with right of survivorship and not as tenants in common

  	
   

  	
  under
  Uniform Gifts to Minors Act

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (State)

  	
   

  

 

 

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

 

 

CONVERSION NOTICE

 

TO:                            LITHIA
MOTORS, INC.

U.S. BANK, NATIONAL ASSOCIATION

 

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

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature(s)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature
  Guarantee

  

 

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

 

 

	
   

  	
   

  
	
  (Name)

  
	
   

  
	
   

  
	
   

  	
   

  
	
  (Street
  Address)

  
	
   

  
	
   

  
	
   

  	
   

  
	
  (City, State
  and Zip Code)

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Please print
  name and address

  
	
   

  
	
  Principal
  amount to be converted

  
	
   (if less than all):

  
	
   

  
	
  $

  	
   

  	
   

  
	
   

  
	
  Social
  Security or Other Taxpayer

  
	
   Identification Number:

  
	
   

  
	
   

  
	
   

  	
   

  
				

 

 

OPTION TO ELECT REPURCHASE

UPON A DESIGNATED EVENT

 

TO:                            LITHIA
MOTORS, INC.

U.S. BANK NATIONAL ASSOCIATION

 

The
undersigned registered owner of this Note hereby irrevocably acknowledges
receipt of a notice from Lithia Motors, Inc. (the “Company”) as to the
occurrence of a Designated Event with respect to the Company and requests and
instructs the Company to repay the entire principal amount of this Note, or the
portion thereof (which is $1,000 or a multiple thereof) below designated, in
accordance with the terms of the Indenture referred to in this Note at the
price of 100% of such entire principal amount or portion thereof, together with
accrued Interest to, but excluding, the Designated Event Repurchase Date, to
the registered holder hereof. 
Capitalized terms used herein but not defined shall have the meanings
ascribed to such terms in the Indenture. 
The Notes shall be repurchased by the Company as of the Designated Event
Repurchase Date pursuant to the terms and conditions specified in the
Indenture.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature(s)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  Principal
  amount to be redeemed (if less than all):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social
  Security or Other Taxpayer Identification Number

  

 

 

REPURCHASE NOTICE

 

TO:                            LITHIA
MOTORS, INC.

U.S. BANK, NATIONAL ASSOCIATION

 

The
undersigned registered owner of this Note hereby requests and instructs Lithia
Motors, Inc. (the “Company”) to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or a multiple
thereof) below designated, in accordance with the terms of the Note and the
Indenture referred to in this Note at the price of 100% of such entire
principal amount or portion thereof, together with accrued Interest to, but
excluding, the Repurchase Date, to the registered holder hereof.  Capitalized terms used herein but not
defined shall have the meanings ascribed to such terms in the Indenture.  The Notes shall be repurchased by the
Company as of the Repurchase Date pursuant to the terms and conditions
specified in the Indenture.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature(s)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  Principal
  amount to be redeemed (if less than all):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social
  Security or Other Taxpayer Identification Number

  

 

 

ASSIGNMENT

 

For value
received
                                                         hereby
sell(s) assign(s) and transfer(s) unto
                                                                       
(Please insert social security or other Taxpayer Identification Number of assignee)
the within Note, and hereby irrevocably constitutes and appoints
                                                                                   
attorney to transfer said Note on the books of the Company, with full power of
substitution in the premises. 
Capitalized terms used herein but not defined shall have the meanings
ascribed to such terms in the Indenture.

 

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

 

o                                    To
Lithia Motors, Inc. or a subsidiary thereof; or

 

o                                    To
a “qualified
institutional buyer” in compliance with Rule 144A under the
Securities Act of 1933, as amended; or

 

o                                    Pursuant
to and in compliance with Rule 144 under the Securities Act of 1933, as
amended; or

 

o                                    Pursuant
to a Registration Statement which has been declared effective under the
Securities Act of 1933, as amended, and which continues to be effective at the
time of transfer;

 

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

 

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

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature(s)

  

 

 

	
   

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

  
	
   

  	
   

  
	
   

  	
  Signature
  Guarantee

  

 

NOTICE: The signature on the
Conversion Notice, the Option to Elect Repurchase Upon a Designated Event, the
Repurchase Notice or the Assignment must correspond with the name as written
upon the face of the Note in every particular without alteration or enlargement
or any change whatsoever.

 

 

Schedule I

 

 

LITHIA MOTORS, INC.

2.875% Convertible Senior Note Due 2014

 

No.  1

 

	
  Date

  	
   

  	
  Principal
  Amount

  	
   

  	
  Notation
  Explaining Principal

  Amount Recorded

  	
   

  	
  Authorized
  Signature

  of Trustee or

  CustodianEXHIBIT 10.1

 

SECOND AMENDMENT

 

THIS SECOND AMENDMENT dated as of December 4, 2003
(this “Amendment”) is to the Credit Agreement (as amended, the “Credit
Agreement”) dated as of February 25, 2003 among LITHIA MOTORS, INC. (the “Company”),
various financial institutions (the “Lenders”) and DAIMLERCHRYSLER
SERVICES NORTH AMERICA LLC, as agent for the Lenders (the “Agent”).  Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as defined in the Credit
Agreement.

 

WHEREAS, the parties hereto desire to amend the Credit
Agreement in certain respects;

 

NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration (the receipt and sufficiency of which
are hereby acknowledged), the parties hereto agree as follows:

 

SECTION 1  AMENDMENTS.  Effective on (and subject to the occurrence
of) the Amendment Effective Date (as defined below):

 

1.1          (a) The following
definitions shall be added to Section 1.1 of the Credit Agreement, each in its
appropriate alphabetical position:

 

Floor Plan Business
means Floor Plan Financing provided or to be provided by any Person in respect
of New Motor Vehicles and/or Auction Motor Vehicles.

 

Provider
– see Section 13.17, as amended hereafter.

 

Second Amendment
Effective Date means December 4, 2003.

 

(b)  The definition of Interest Rate in Section
1.1 of the Credit Agreement shall be amended and restated in its entirety to
read as follows:

 

Interest Rate
means, for each day, a rate per annum equal to the sum of (a) (i) in the case
of any day from and including the first day of each calendar month through and
including the 15th day of such calendar month, the Eurodollar Rate for the
first day of such calendar month and (ii) in the case of any day from and
including the 16th day of each calendar month through and including the last
day of such calendar month, the Eurodollar Rate for the 16th day of such
calendar month plus (b) (i) to the extent that the Revolving Outstandings are
less than or equal to the Borrowing Base, a margin of two and three-quarters
percent (2.75%) per annum and (ii) to the extent that the Revolving
Outstandings exceed the Borrowing Base, a margin of three and one-half percent
(3.50%) per annum (with the determination of such Borrowing Base to be
effective as of the first day of the calendar month during which the Borrowing
Base Certificate is delivered).  The
foregoing margins may be adjusted at any time in the Agent’s sole and absolute

 

Second Amendment

 

 

discretion upon 90 days’
prior written notice from the Agent to the Company; provided that (i) no
reduction in such margins shall be permitted without the prior written consent
of each Lender, (ii) no more than one such adjustment may be made during any
period of twelve consecutive months and (iii) no such notice may be delivered
until the date which is 90 days prior to the first anniversary of the Closing
Date.  Notwithstanding the foregoing,
(i) at any time an Event of Default exists under Section 11.1.1 or 11.1.4,
if requested by the Required Lenders, the applicable margin shall be increased
by two percent (2.00%) per annum and (ii) at any time an Event of Default
exists other than an Event of Default under Section 11.1.1 or 11.1.4,
if requested by the Required Lenders, the applicable margin shall be increased
by one percent (1.00%) per annum.  For
purposes of this definition, “Eurodollar Rate”
means, for any day, the rate of interest (rounded upwards, if necessary, to the
next 1/16th of 1%) published in The Wall Street
Journal (Midwest Edition) on such day (or if not published on such
day, for the immediately preceding day on which it was published) in its “Money
Rates” column as the one-month London Interbank Offered Rate for
Dollar-denominated deposits (if The Wall Street
Journal ceases to publish such a rate or substantially changes the
methodology used to determine such rate, then the rate shall be otherwise
independently determined by the Agent from an alternate source selected by the
Agent in its sole discretion or determined by the Agent on a basis substantially
similar to the methodology used by The Wall Street
Journal on the date of this Agreement).  If the Company fails to deliver any Borrowing Base Certificate
required by Section 9.1.6 by the 45th day after any Fiscal
Quarter, then, from the first day of the month during which such Borrowing Base
Certificate was required to be delivered until the first day of the month
during which such Borrowing Base Certificate is actually delivered, the first
$50,000,000 of Revolving Loans shall bear interest at an Interest Rate
determined pursuant to clause (b)(ii) above, but subject to the fourth
sentence of this definition.

 

1.2          Section 2.2 of the
Credit Agreement shall be amended by inserting the following sentence after the
final sentence thereof:  

 

“The Company may not use
the Agent’s electronic funds transfer system to fund any borrowings under this
Agreement.”

 

1.3          Section 5.1 of the
Credit Agreement shall be amended and restated in its entirety to read as
follows:

 

5.1           Agent’s Fee.  Each Lender hereto that is not DCSNA
acknowledges and agrees that the Agent may deduct from interest payments
received by it from the Company an amount equal to 0.15% per annum of the daily
unpaid principal amount of the Loans of such Lender.  All fees under this Section are nonrefundable.

 

1.4          Section 7.1 of the
Credit Agreement shall be amended and restated in its entirety to read as
follows:

 

2

 

7.1           Making of Payments.  All payments of principal of or interest on
the Notes, and of all fees, shall be made by the Company to the Agent in
immediately available funds at the office specified by the Agent not later than
2:00 p.m., Detroit time, on the date due; and funds received after that hour
shall be deemed to have been received by the Agent on the following Business
Day.  For purposes of the preceding
sentence, “in immediately available funds” shall mean (a) with respect to
payments of principal of the Notes, by federal wire transfer and (b) with
respect to payments of interest on the Notes and payments of all fees, by
federal wire transfer or by the Agent’s electronic funds transfer system (in
accordance with written instructions provided by the Agent to the
Company).  The Agent shall remit to each
Lender its share of all such payments received in collected funds by the Agent
for the account of such Lender (x) on the same Business Day it has received any
payment in respect of principal and (y) no later than the Business Day after it
has received any payment in respect of interest or fees.

 

1.5          Section 9.7(i) of the
Credit Agreement shall be amended by (x) deleting the words “or Toyota Motor
Credit Corporation” therein and (y) substituting the word “or” for the comma
immediately following the words “General Motors Acceptance Corporation”
therein.

 

1.6          Section 9.7(j) of the
Credit Agreement shall be amended by inserting the words “or Toyota Motor
Credit Corporation” immediately after the term “DCSNA” therein.

 

1.7          Section 9.7(k) of the
Credit Agreement shall be amended by (x) inserting the words “and Toyota Motor
Credit Corporation” immediately after each reference to the term “DCSNA”
therein and (y) substituting the word “have” for the word “has” therein.

 

1.8          Section 9.8(d) of the
Credit Agreement shall be amended by inserting the words “and improvements
thereon” at the end of clause (ii) thereof.

 

1.9          Section 9.8(h) of the
Credit Agreement shall be amended by (x) substituting the word “for” for the
word “with” therein and (y) substituting the words “is providing financing” for
the words “is affiliated” therein.

 

1.10        Section 9.20(h) of the
Credit Agreement shall be amended by (x) deleting the existing text therein and
(y) substituting “[INTENTIONALLY LEFT BLANK]” therefor.

 

1.11        Section 9.20 of the Credit
Agreement shall be amended by substituting the designation “(c) or (g)”
for the designation “(c), (g) or (h)” in clause (y) of the
proviso therein.

 

1.12        Section 11.2 of the Credit
Agreement shall be amended by substituting the term “Cash Collateral” for the
words “cash collateral” each place where they appear therein. 

 

1.13        Section 13.17 of the
Credit Agreement shall be amended and restated in its entirety to read as
follows:

 

13.17       DCSNA and Toyota Motor
Credit Corporation Right of First Refusal on Floor Plan Financing.  No Automobile Dealership shall obtain any
Floor Plan Financing

 

3

 

from any Person
other than DCSNA or Toyota Motor Credit Corporation (other than Floor Plan
Financings permitted under Section 9.7(i)) unless and until it shall
have submitted a request in writing to each of DCSNA and Toyota Motor Credit
Corporation (each, a “Provider”) that each Provider provide such Floor
Plan Financing on terms consistent with the terms of the Floor Plan Financing
at the time provided by such Provider to the Company and the other Automobile
Dealerships and provided a reasonable opportunity to each Provider to provide
such financing and each Provider shall have declined to provide the same.  For purposes hereof, a Provider will be deemed
to have declined to provide any Floor Plan Financing requested by an Automobile
Dealership in writing if it shall have failed to respond to such Automobile
Dealership within ten Business Days of receiving such written request.  If each Provider declines to provide any
such requested Floor Plan Financing, the Automobile Dealership that requested
the same may then obtain such requested Floor Plan Financing from another
Person.

 

1.14        Schedule
2.1 to the Credit Agreement shall be replaced by Schedule 2.1 hereto.

 

1.15        Schedule 13.3 of the Credit Agreement shall be
amended by inserting the following text at the end thereof: 

 

TOYOTA MOTOR CREDIT CORPORATION,
as a Lender

 

Notices of Borrowing and All Other Notices

 

19001 South
Western Avenue

Torrance,
CA  90509-2958

Attention:  Reid Boozer

Telephone: (310) 468-4791

Facsimile: (310) 381-7794

 

SECTION 2
 REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Agent and the Lenders that:  (a) the representations and warranties made
in Section 8 of the Credit Agreement are true and correct on and as of the
Amendment Effective Date (as defined below) with the same effect as if made on
and as of the Amendment Effective Date (except to the extent relating solely to
an earlier date, in which case they were true and correct as of such earlier
date); (b) no Event of Default or Unmatured Event of Default exists or will
result from the execution of this Amendment; (c) no event or circumstance has
occurred since the Closing Date that has resulted, or would reasonably be
expected to result, in a Material Adverse Effect; (d) the execution and
delivery by the Company of this Amendment and the performance by the Company of
its obligations under the Credit Agreement as amended hereby (as so amended,
the “Amended Credit Agreement”) (i) are within the corporate powers of
the Company, (ii) have been duly authorized by all necessary corporate action,
(iii) have received all necessary approval from any governmental authority and
(iv) do not and will not contravene or conflict with any provision of any law,
rule or regulation or any order, decree, judgment or award which is binding on
the Company or any of its Subsidiaries or of any provision of the

 

4

 

certificate of
incorporation or bylaws or other organizational documents of the Company or of
any agreement, indenture, instrument or other document which is binding on the
Company or any of its Subsidiaries; and (e) the Amended Credit Agreement is the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency or similar laws affecting the enforcement
of creditors’ rights generally or by equitable principles relating to
enforceability.

 

SECTION 3
 EFFECTIVENESS.  The amendments set forth in Section 1
above shall become effective as of such date (the “Amendment Effective Date”)
when the Agent shall have received (a) a counterpart of this Amendment executed
by the Company and the Lenders (or, in the case of any party other than the
Company from which the Agent has not received a counterpart hereof, facsimile
confirmation of the execution of a counterpart hereof by such party) and (b)
each of the following documents, each in form and substance satisfactory to the
Agent:

 

3.1          Reaffirmation.  A counterpart of the Reaffirmation of Loan
Documents, substantially in the form of Exhibit A, executed by each Loan
Party other than the Company.

 

3.2          Assignment Agreement.  A counterpart of an Assignment Agreement,
substantially in the form of Exhibit B, executed by DCSNA, Toyota Motor
Credit Corporation, the Agent and the Company.

 

3.3          Amended
and Restated Intercreditor Agreement.          A
counterpart of the Amended and Restated Intercreditor Agreement, substantially
in the form of Exhibit C, executed by 
DCSNA, Toyota Motor Credit Corporation, Ford Motor Credit Company and
General Motors Acceptance Corporation.

 

3.4          Other Documents.  Such other documents as the Agent or any
Lender may reasonably request.

 

SECTION 4  MISCELLANEOUS.

 

4.1          Continuing
Effectiveness, etc.  As hereby
amended, the Credit Agreement shall remain in full force and effect and is
hereby ratified and confirmed in all respects. 
As of the Amendment Effective Date, all references in the Credit
Agreement, the Notes, each other Loan Document and any similar document to the
“Credit Agreement” or similar terms shall refer to the Amended Credit
Agreement. 

 

4.2          Counterparts.  This Amendment may be executed in any number
of counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.

 

4.3          Expenses.  The Company agrees to pay the reasonable
costs and expenses of the Agent (including reasonable fees and disbursements of
counsel, including, without duplication, the allocable costs of internal legal
services and all disbursements of internal legal counsel) in connection with
the preparation, execution and delivery of this Amendment.

 

5

 

4.4          Governing Law.  This Amendment shall be a contract made
under and governed by the laws of the State of Michigan applicable to contracts
made and to be wholly performed within the State of Michigan.

 

4.5          Successors and
Assigns.  This Amendment shall be
binding upon the Company, the Lenders and the Agent and their respective
successors and assigns, and shall inure to the benefit of the Company, the
Lenders and the Agent and the successors and assigns of the Lenders and the
Agent.

 

4.6          Termination of Letter
Agreement Regarding Section 13.17 of the Credit Agreement.  The Company and DCSNA hereby agree that as
of the Amendment Effective Date the letter agreement dated as of February 25,
2003 by and between the Company and DCSNA regarding Section 13.17 of the Credit
Agreement is terminated.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

6

 

Delivered as of
the day and year first above written.

 

 

	
   

  	
  LITHIA MOTORS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey B. DeBoer 

  	
   

  
	
   

  	
  Title:

  	
  Senior VP and CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DAIMLERCHRYSLER SERVICES NORTH

  AMERICA LLC, as the Agent, as the Issuing

  Lender and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ M. L’Archer

  	
   

  
	
   

  	
  Title:

  	
  Director, Dealer Credit

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TOYOTA MOTOR CREDIT CORPORATION,

  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ D. M. Taylor

  	
   

  
	
   

  	
  Title:

  	
  Corporate Mgr. Dealer Relations

  	
   

  
											

 

S-1

 

SCHEDULE 2.1

 

LENDERS AND PRO RATA
SHARES

 

	
  Lender

  	
   

  	
  Pro Rata
  Share

  of Revolving

  Commitment Amount

  	
   

  	
  Pro Rata
  Share

  	
   

  
	
  DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC

  	
   

  	
  $

  	
  125,000,000

  	
   

  	
  62.5

  	
  %

  
	
  TOYOTA MOTOR CREDIT CORPORATION

  	
   

  	
  $

  	
  75,000,000

  	
   

  	
  37.5

  	
  %

  
	
  TOTALS

  	
   

  	
  $

  	
  200,000,000

  	
   

  	
  100

  	
  %

  

 

 

EXHIBIT A

 

FORM OF REAFFIRMATION

 

December 4, 2003

 

DaimlerChrysler Services North

America LLC, as the Agent

and the Lenders party

to the Credit Agreement

referred to below

27777 Inkster Road

Farmington Hills, Michigan
48334

Attn: Michele Nowak

 

Re:  Reaffirmation of Loan Documents 

 

Ladies and Gentlemen:

 

Please refer
to:

 

(a)           The Security Agreement
dated as of  February 25, 2003 (the “Security
Agreement”) among Lithia Motors, Inc. (the “Company”), its
subsidiaries and DaimlerChrysler Services North America LLC in its capacity as
Agent (in such capacity, the “Agent”);

 

(b)           The Guaranty dated as of February 25, 2003
(the “Guaranty”) executed in favor of the Agent and various other
parties by all subsidiaries of the Company; and

 

(c)           The Pledge Agreement
dated as of February 25, 2003 (the “Pledge Agreement”) executed by the
Company and certain of its subsidiaries.

 

Each of the
undersigned acknowledges that the Company, the Lenders and the Agent have
executed the Second Amendment (the “Second Amendment”) to the Credit
Agreement dated as of February 25, 2003 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”).  Capitalized terms not otherwise defined
herein have the meanings given in the Credit Agreement.

 

Each of the
undersigned hereby confirms that the Security Agreement, the Guaranty, the
Pledge Agreement and each other Loan Document to which such undersigned is a
party remains in full force and effect after giving effect to the effectiveness
of the Second Amendment and that, upon such effectiveness, all references in
each Loan Document to the “Credit Agreement” shall be references to the Credit
Agreement, as amended by the Second Amendment.

 

Reaffirmation of Loan Documents

 

 

 

This letter agreement may be signed in
counterparts and by the various parties on separate counterparts.  This letter agreement shall be governed by
the laws of the State of Michigan applicable to contracts made and to be
performed entirely within such State.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK.  SIGNATURES FOLLOW]

 

2

 

	
   

  	
  HUTCHINS EUGENE NISSAN, INC.

  
	
   

  	
  HUTCHINS
  IMPORTED MOTORS, INC.

  
	
   

  	
  LGPAC, INC.

  
	
   

  	
  LITHIA AUTO
  SERVICES, INC.

  
	
   

  	
  LITHIA BNM,
  INC.

  
	
   

  	
  LITHIA DE,
  INC.

  
	
   

  	
  LITHIA DM,
  INC.

  
	
   

  	
  LITHIA HPI,
  INC.

  
	
   

  	
  LITHIA
  KLAMATH, INC.

  
	
   

  	
  LITHIA LAC,
  INC.

  
	
   

  	
  LITHIA
  MEDFORD HON, INC.

  
	
   

  	
  LITHIA
  MOTORS SUPPORT SERVICES, INC.

  
	
   

  	
  LITHIA MTLM,
  INC.

  
	
   

  	
  LITHIA OF
  ROSEBURG, INC.

  
	
   

  	
  LITHIA
  RENTALS, INC.

  
	
   

  	
  LITHIA
  ROSE-FT, INC.

  
	
   

  	
  LITHIA SOC,
  INC.

  
	
   

  	
  SATURN OF
  SOUTHWEST OREGON, INC.

  
	
   

  	
  LITHIA CHRYSLER JEEP OF ANCHORAGE,

  INC.

  
	
   

  	
  LITHIA
  IMPORTS OF ANCHORAGE, INC.

  
	
   

  	
  LITHIA CIMR,
  INC.

  
	
   

  	
  LITHIA CJDB,
  INC.

  
	
   

  	
  LITHIA DC,
  INC.

  
	
   

  	
  LITHIA FMF,
  INC.

  
	
   

  	
  LITHIA FN,
  INC.

  
	
   

  	
  LITHIA FVHC,
  INC.

  
	
   

  	
  LITHIA JEF,
  INC.

  
	
   

  	
  LITHIA MMF,
  INC.

  
	
   

  	
  LITHIA NF,
  INC.

  
	
   

  	
  LITHIA OF
  ANCHORAGE, INC.

  
	
   

  	
  LITHIA TKV,
  INC.

  
	
   

  	
  LITHIA TR,
  INC.

  
	
   

  	
  LITHIA VWC,
  INC.

  
	
   

  	
  LITHIA VWPC,
  INC.

  
	
   

  	
  LITHIA CENTENNIAL CHRYSLER PLYMOUTH

  JEEP, INC.

  
	
   

  	
  LITHIA
  CHERRY CREEK DODGE, INC.

  
	
   

  	
  LITHIA COLORADO CHRYSLER PLYMOUTH,

  INC.

  
	
   

  	
  LITHIA
  COLORADO JEEP, INC.

  
	
   

  	
  LITHIA COLORADO SPRINGS JEEP CHRYSLER

  PLYMOUTH, INC.

  
	
   

  	
  LITHIA
  FOOTHILLS CHRYSLER, INC.

  
	
   

  	
  LITHIA OF
  THORNTON, INC.

  
	
   

  	
  LITHIA CB,
  INC.

  

 

S-1

 

	
   

  	
  LITHIA DB,
  INC.

  
	
   

  	
  LITHIA IB,
  INC.

  
	
   

  	
  LITHIA LMB,
  INC.

  
	
   

  	
  LITHIA FORD
  OF BOISE, INC.

  
	
   

  	
  LITHIA OF
  CALDWELL, INC.

  
	
   

  	
  LITHIA OF
  POCATELLO, INC.

  
	
   

  	
  LITHIA
  POCA-HON, INC.

  
	
   

  	
  LITHIA CD,
  INC.

  
	
   

  	
  LITHIA OF
  OMAHA, INC.

  
	
   

  	
  LITHIA MBO,
  INC.

  
	
   

  	
  LITHIA RENO
  SUB-HYUN, INC.

  
	
   

  	
  LITHIA
  SALMIR, INC.

  
	
   

  	
  LITHIA
  AUTOMOTIVE, INC.

  
	
   

  	
  LITHIA OF
  SIOUX FALLS, INC.

  
	
   

  	
  CAMP AUTOMOTIVE,
  INC.

  
	
   

  	
  LITHIA BC,
  INC.

  
	
   

  	
  LITHIA DC OF
  RENTON, INC.

  
	
   

  	
  LITHIA DODGE
  OF TRI-CITIES, INC.

  
	
   

  	
  LITHIA FTC,
  INC.

  
	
   

  	
  LITHIA IC,
  INC.

  
	
   

  	
  LITHIA OF
  SEATTLE, INC.

  
	
   

  	
  TC HON, INC.

  
	
   

  	
  LITHIA HYR,
  INC.

  
	
   

  	
  LITHIA CS,
  INC.

  
	
   

  	
  LITHIA OF
  FAIRFIELD, INC.

  
	
   

  	
  LITHIA OF
  SANTA ROSA, INC.

  
	
   

  	
  LITHIA OF
  VACAVILLE, INC.

  
	
   

  	
  LITHIA CCTF,
  INC.

  
	
   

  	
  LITHIA OF
  TWIN FALLS, INC.

  
	
   

  	
  LITHIA LMM,
  INC.

  
	
   

  	
  LITHIA OF
  MISSOULA, INC.

  
	
   

  	
  LITHIA OF
  OKLAHOMA, INC.

  
	
   

  	
  LITHIA OF
  BILLINGS, INC.

  
	
   

  	
  LITHIA OF
  SPOKANE, INC.

  
	
   

  	
  LITHIA OF
  FAIRBANKS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

S-2

 

	
   

  	
  LITHIA LP OF
  TEXAS, LLC

  
	
   

  	
  LITHIA GP OF
  TEXAS, LLC

  
	
   

  	
   

  	
  By:  Lithia Motors, Inc., Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LITHIA LAC
  OF WASHINGTON, LLC

  	
   

  
	
   

  	
   

  	
  By:

  	
  Lithia LAC,
  Inc., Manager

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LITHIA SH,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SOE, LLC

  
	
   

  	
   

  	
  By:

  	
  Lithia SH,
  LLC, Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LITHIA VS,
  LLC

  
	
   

  	
   

  	
  By:  Camp Automotive, Inc., Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LITHIA
  CJDBS, L.P.

  
	
   

  	
  LITHIA CJDO,
  L.P.

  
	
   

  	
  LITHIA
  CJDSA. L.P.

  
	
   

  	
  LITHIA CM,
  L.P.

  
	
   

  	
  LITHIA CO,
  L.P.

  
	
   

  	
  LITHIA CSA,
  L.P.

  
	
   

  	
  LITHIA DMID,
  L.P.

  
	
   

  	
  LITHIA DSA,
  L.P.

  
	
   

  	
  LITHIA HMID,
  L.P.

  
	
   

  	
  LITHIA NSA,
  L.P.

  
	
   

  	
  LITHIA OF
  GRAPEVINE, L.P.

  
	
   

  	
   

  	
  By:  Lithia GP of Texas, LLC, General Partner

  
	
   

  	
   

  	
  By:  Lithia Motors, Inc., Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
												

 

S-3

 

	
   

  	
  LRE
  SPRINGFIELD, LLC

  
	
   

  	
   

  	
  By:  Lithia Real Estate, Inc., Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED
  AND AGREED

  	
   

  	
   

  
	
  as of the
  date first written above

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DAIMLERCHRYSLER
  SERVICES NORTH

  	
   

  	
   

  
	
  AMERICA,
  LLC, as the Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
									

 

S-4

 

EXHIBIT B

 

ASSIGNMENT
AGREEMENT

 

Date:  December 4, 2003

 

To:          Lithia
Motors, Inc.

 

and

 

DaimlerChrysler
Services North America LLC, as Agent

 

Re:  Assignment under the Credit Agreement referred to below

 

Ladies and Gentlemen:

 

Please refer to Section 13.9.1 of the Credit
Agreement, dated as of February 25, 2003 (as amended or otherwise modified from
time to time, the “Credit Agreement”)
among Lithia Motors, Inc. (the “Company”),
various financial institutions and DaimlerChrysler Services North America LLC,
as agent (in such capacity, the “Agent”).  Unless otherwise defined herein or the
context otherwise requires, capitalized terms used herein have the meanings
provided in the Credit Agreement.

 

DCSNA (the “Assignor”)
hereby sells and assigns to Toyota Motor Credit Corporation (the “Assignee”), and the Assignee hereby purchases
and assumes from the Assignor, that interest in and to the Assignor’s rights
and obligations under the Credit Agreement as of the date hereof equal to  37.5% of the Assignor’s Loans, Letters of
Credit and Commitments, such sale, purchase, assignment and assumption to be
effective as of December 4, 2003, or such later date on which the Company and
the Agent shall have consented hereto, to the extent such consents are required
(the “Effective Date”).  After giving effect to such sale, purchase,
assignment and assumption, the Assignee’s and the Assignor’s respective
Commitments and Pro Rata Shares for purposes of the Credit Agreement will be as
set forth below their names on the signature pages hereof.

 

The Assignor hereby
instructs the Agent to make all payments from and after the Effective Date in
respect of the interest assigned hereby directly to the Assignee.  The Assignor and the Assignee agree that all
interest and fees accrued up to, but not including, the Effective Date are the
property of the Assignor, and not the Assignee, provided that the
Assignor agrees to pay to the Assignee on the Effective Date an amount equal to
$17,054.94 representing the Pro Rata Share of the Assignee in the fees
previously paid by the Company pursuant to Section 5.2 of the Credit Agreement
for the period from the Effective Date to the first anniversary of the Closing
Date (the “TMCC Facility Fee”). 
The Assignee agrees that, upon receipt of any such interest or fees
(other than the TMCC Facility Fee), the Assignee will promptly remit the same to
the Assignor.

 

The Assignee hereby confirms that it has received a
copy of the Credit Agreement and the exhibits thereto, together with copies of
the documents which were required to be delivered

 

Assignment Agreement

 

 

under the Credit
Agreement as a condition to the making of the initial extensions of credit
thereunder.  The Assignee acknowledges
and agrees that it (i) has made and will continue to make such inquiries and
has taken and will take such care on its own behalf as would have been the case
had its Commitment been granted and its Loans been made directly to the Company
without the intervention of the Agent, the Assignor or any other Lender and
(ii) has made and will continue to make, independently and without reliance
upon the Agent, the Assignor or any other Lender and based on such documents
and information as it has deemed appropriate, its own credit analysis and
decisions relating to the Credit Agreement. 
The Assignee further acknowledges and agrees that neither the Agent nor
the Assignor has made any representation or warranty about the creditworthiness
of the Company or any other party to the Credit Agreement or any other Loan
Document or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement or any other Loan Document or the value
of any security therefor.  This
assignment shall be made without recourse to the Assignor.

 

The Assignor represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim.

 

The Assignee represents and warrants to the Company
and the Agent that, as of the date hereof, the Company will not be obligated to
pay any greater amount under Section 7.6 of the Credit Agreement than
the Company is obligated to pay to the Assignor under such Section.

 

Except as otherwise provided in the Credit Agreement,
effective as of the Effective Date:

 

(a)           the Assignee (i) shall
be deemed automatically to have become a party to the Credit Agreement and to
have all the rights and obligations of a “Lender” under the Credit Agreement as
if it were an original signatory thereto to the extent specified in the second
paragraph hereof; and (ii) agrees to be bound by the terms and conditions set forth
in the Credit Agreement as if it were an original signatory thereto; and

 

(b)           the Assignor shall be
released from its obligations under the Credit Agreement to the extent
specified in the second paragraph hereof.

 

The Assignee hereby
advises each of you of the following administrative details with respect to the
assigned Loans and Commitment:

 

	
  (A)

  	
  Institution
  Name:

  	
   

  	
  Toyota Motor Credit
  Corporation

  	
   

  
	
   

  	
  Address:

  	
   

  	
  19001 South Western
  Avenue

  	
   

  
	
   

  	
   

  	
   

  	
  Torrance, CA  90509-2958

  	
   

  
	
   

  	
  Attention:

  	
   

  	
  Reid Boozer

  	
   

  
	
   

  	
  Telephone:

  	
   

  	
  (310) 468-4791

  	
   

  
	
   

  	
  Facsimile:

  	
   

  	
  (310) 381-7794

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (B)

  	
  Payment Instructions:
  Bank:  Bank of America, N.A., Concord
  CA

  	
   

  
	
   

  	
  ABA#:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Account
  #:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Account
  Name:

  	
   

  	
  TMCC

  	
   

  
	
   

  	
  Attention:  Ref:

  	
   

  	
  Lithia

  	
   

  
								

 

2

 

Please evidence your
receipt hereof and your consent to the sale, assignment, purchase and
assumption set forth herein by signing and returning counterparts hereof to the
Assignor and the Assignee.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

3

 

	
   

  	
  TOYOTA MOTOR CREDIT CORPORATION,

  as the Assignee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Commitment = $75,000,000

  
	
   

  	
  Pro Rata Share = 37.5%

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DAIMLERCHRYSLER SERVICES NORTH

  AMERICA LLC, as the Assignor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Commitment = $125,000,000

  
	
   

  	
  Pro Rata Share = 62.5%

  
				

 

Intercreditor Agreement

 

 

	
  ACKNOWLEDGED AND CONSENTED TO

  
	
  this 4th day of December, 2003

  
	
   

  
	
  DAIMLERCHRYSLER
  SERVICES NORTH AMERICA LLC, as the Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  ACKNOWLEDGED AND CONSENTED TO

  
	
  this 4th day of December, 2003

  
	
   

  
	
   

  
	
  LITHIA MOTORS, INC.,
  as the Company

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
						

 

2

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