Document:

exv10w25

 

Exhibit 10.25

 

STOCK PURCHASE AGREEMENT

dated as of August 21, 2006

by and among

Directed Electronics, Inc.

as the Purchaser,

Polk Holding Corp.,

George M. Klopfer, as the Seller Representative

and

The Stockholders and Option Holder set forth on the

Stockholder Signature Page attached hereto,

as the Sellers

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I. PURCHASE AND SALE OF POLK STOCK; THE CLOSING	 	 	1	 
	 
	Section 1.1
	 	Purchase and Sale of Polk Stock 	 	 	1	 
	Section 1.2
	 	Purchase Price 	 	 	1	 
	Section 1.3
	 	The Closing 	 	 	1	 
	Section 1.4
	 	Payment of the Purchase Price 	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	 	 	2	 
	 
	 	 	 	 	 	 
	Section 2.1
	 	Organization; Corporate Power and Authorization 	 	 	2	 
	Section 2.2
	 	Binding Effect and Noncontravention 	 	 	3	 
	Section 2.3
	 	Brokerage 	 	 	3	 
	Section 2.4
	 	Financial Ability 	 	 	3	 
	Section 2.5
	 	No Litigation 	 	 	4	 
	Section 2.6
	 	Investment 	 	 	4	 
	Section 2.7
	 	Accuracy on Closing Date 	 	 	4	 
	Section 2.8
	 	Acknowledgement by the Purchaser 	 	 	4	 
	Section 2.9
	 	No Knowledge of Company Breaches 	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLERS	 	 	5	 
	 
	 	 	 	 	 	 
	Section 3.1
	 	Authorization 	 	 	5	 
	Section 3.2
	 	Binding Effect and Noncontravention 	 	 	5	 
	Section 3.3
	 	Capital Stock 	 	 	5	 
	Section 3.4
	 	Accuracy on Closing Date 	 	 	6	 
	Section 3.5
	 	No Knowledge of Company Breaches 	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	6	 
	 
	 	 	 	 	 	 
	Section 4.1
	 	Organization; Qualification and Corporate Power 	 	 	6	 
	Section 4.2
	 	Approvals and Consents 	 	 	6	 
	Section 4.3
	 	Capitalization; Subsidiaries 	 	 	7	 
	Section 4.4
	 	Financial Statements 	 	 	8	 
	Section 4.5
	 	Events Subsequent to the Latest Balance Sheet 	 	 	9	 
	Section 4.6
	 	Inventory 	 	 	9	 
	Section 4.7
	 	Accounts Receivable 	 	 	9	 
	Section 4.8
	 	Title to Assets 	 	 	9	 
	Section 4.9
	 	Compliance with Laws 	 	 	9	 
	Section 4.10
	 	Tax Matters 	 	 	10	 
	Section 4.11
	 	Environmental Matters 	 	 	12	 
	Section 4.12
	 	Intellectual Property 	 	 	12	 
	Section 4.13
	 	Real Estate 	 	 	13	 
	Section 4.14
	 	Certain Litigation 	 	 	14	 
	Section 4.15
	 	Employee Benefits 	 	 	14	 
	Section 4.16
	 	Affiliate Transactions 	 	 	15	 
	Section 4.17
	 	Insurance 	 	 	15	 
	Section 4.18
	 	Employees 	 	 	15	 
	Section 4.19
	 	Contracts 	 	 	16	 
	Section 4.20
	 	Products; Product Warranties 	 	 	17	 
	Section 4.21
	 	Broker Fees 	 	 	18	 
	Section 4.22
	 	Suppliers and Customers 	 	 	18	 
	Section 4.23
	 	Absence of Certain Business Practices 	 	 	18	 
	Section 4.24
	 	Accuracy on Closing Date 	 	 	18	 

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	 	 	 	 	Page	 
	Section 4.25
	 	No Additional Representations 	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE V. COVENANTS AND OTHER AGREEMENTS	 	 	19	 
	 
	 	 	 	 	 	 
	Section 5.1
	 	General 	 	 	19	 
	Section 5.2
	 	Operation of the Business 	 	 	19	 
	Section 5.3
	 	General Restrictions 	 	 	20	 
	Section 5.4
	 	Access to Records 	 	 	21	 
	Section 5.5
	 	Intentionally Left Blank 	 	 	21	 
	Section 5.6
	 	No Shop 	 	 	21	 
	Section 5.7
	 	HSR Act 	 	 	22	 
	Section 5.8
	 	Cooperation with Respect to Financing 	 	 	22	 
	Section 5.9
	 	Stock Options 	 	 	22	 
	Section 5.10
	 	Further Assurances 	 	 	23	 
	Section 5.11
	 	Record Retention 	 	 	23	 
	Section 5.12
	 	Intentionally Left Blank 	 	 	23	 
	Section 5.13
	 	Employee Matters 	 	 	23	 
	Section 5.14
	 	Tax Matters 	 	 	24	 
	Section 5.15
	 	Non-Competition, Non-Solicitation and Non-Disclosure 	 	 	28	 
	Section 5.16
	 	Public Announcements 	 	 	30	 
	Section 5.17
	 	Litigation Support 	 	 	30	 
	Section 5.18
	 	Transaction Expenses 	 	 	31	 
	Section 5.19
	 	Post-Closing Company Executive Compensation and Short-and Long-Term Incentive Compensation Arrangements	 	 	31	 
	Section 5.20
	 	Replacement LCs 	 	 	31	 
	Section 5.21
	 	Post-Closing Lease Amendment 	 	 	31	 
	Section 5.22
	 	Employment Agreements with Polk and Klopfer 	 	 	31	 
	 
	 	 	 	 	 	 
	ARTICLE VI. SURVIVAL AND INDEMNIFICATION	 	 	32	 
	 
	 	 	 	 	 	 
	Section 6.1
	 	Survival of Representations and Warranties 	 	 	32	 
	Section 6.2
	 	Indemnification Obligations of the Sellers 	 	 	32	 
	Section 6.3
	 	Indemnification Obligations of the Purchaser 	 	 	33	 
	Section 6.4
	 	Limitations on Indemnification 	 	 	33	 
	Section 6.5
	 	Indemnification Procedures 	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE VII. CONDITIONS TO THE CLOSING	 	 	36	 
	 
	 	 	 	 	 	 
	Section 7.1
	 	Conditions of the Purchaser’s Obligation 	 	 	36	 
	Section 7.2
	 	Conditions of the Sellers’ Obligation 	 	 	38	 
	 
	 	 	 	 	 	 
	ARTICLE VIII. DEFINITIONS	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE IX. MISCELLANEOUS	 	 	46	 
	 
	 	 	 	 	 	 
	Section 9.1
	 	Termination 	 	 	46	 
	Section 9.2
	 	Remedies 	 	 	47	 
	Section 9.3
	 	Confidentiality 	 	 	47	 
	Section 9.4
	 	Consent to Amendments 	 	 	47	 
	Section 9.5
	 	Successors and Assigns 	 	 	47	 
	Section 9.6
	 	Governing Law 	 	 	47	 
	Section 9.7
	 	Notices 	 	 	48	 
	Section 9.8
	 	Schedules and Exhibits 	 	 	49	 
	Section 9.9
	 	Counterparts 	 	 	49	 
	Section 9.10
	 	Time is of the Essence 	 	 	50	 
	Section 9.11
	 	No Third-Party Beneficiaries 	 	 	50	 
	Section 9.12
	 	Headings 	 	 	50	 
	Section 9.13
	 	Entire Agreement 	 	 	50	 
	Section 9.14
	 	Recitals 	 	 	50	 
	Section 9.15
	 	Severability 	 	 	50	 

iii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 9.16.
	 	Nature of Sellers’ Obligations 	 	 	50	 
	Section 9.17.
	 	CONSENT TO JURISDICTION 	 	 	51	 
	Section 9.18.
	 	Seller Representative 	 	 	51	 

LIST OF EXHIBITS

	 	 	 
	Exhibit A -

	 	Indemnity Escrow Agreement
	Exhibit B -

	 	Financial Statements
	Exhibit C -

	 	Form of Opinion of Sellers’ Counsel
	Exhibit D -

	 	Form of Opinion of Purchaser’s Counsel
	Exhibit E -

	 	Confidentiality Agreement
	Exhibit F -

	 	Names and Likeness Agreement
	Exhibit G -

	 	Post-Closing Company Executive Compensation and Short- and
Long-Term Incentive Compensation Arrangements
	Exhibit H -

	 	Terms of Lease Amendments

iv

 

STOCK PURCHASE AGREEMENT

     This STOCK PURCHASE AGREEMENT is dated as of August 21, 2006 (this “Agreement”) and is by and
among Directed Electronics, Inc. a Florida corporation (the “Purchaser”); Polk Holding Corp., a
Maryland corporation (the “Company”); the stockholders and option holder of the Company listed on
the stockholder signature page attached hereto (each a “Seller” and collectively, the “Sellers”)
and George M. Klopfer, as the Sellers’ representative (the “Seller Representative”). The Purchaser,
the Company, the Sellers and the Seller Representative are sometimes collectively called, the
“Parties.” Certain capitalized terms which are used herein are defined in Article VIII
below.

RECITALS

	 	A.	 	As of the date hereof, the Sellers own collectively 100% of the Company’s
issued and outstanding capital stock (the “Polk Stock”), consisting entirely of Common
Stock (defined in Article VIII below).
	 
	 	B.	 	The Parties desire to enter into this Agreement pursuant to which the Sellers
agree to sell to the Purchaser for the Purchase Price (defined in Section 1.2(a) below)
and the Purchaser agrees to purchase from the Sellers all of the Polk Stock (such sale
and purchase transaction being called, the “Purchase”).

     NOW, THEREFORE, in consideration of the premises and the mutual promises made herein, and in
consideration of the representations, warranties and covenants herein contained, the Parties hereby
agree as follows:

ARTICLE I.

PURCHASE AND SALE OF POLK STOCK; THE CLOSING

Section 1.1 Purchase and Sale of Polk Stock

     At the Closing, subject to the terms and conditions of this Agreement, the Purchaser shall
purchase from the Sellers and the Sellers shall sell, convey, assign, transfer, and deliver to the
Purchaser, all of the Polk Stock.

Section 1.2 Purchase Price

     The cash purchase price (the “Purchase Price”) for the Polk Stock shall consist of
$136,250,000.00, less the Funded Debt Amount, to be paid by the Purchaser as described in
Section 1.4 below.

Section 1.3 The Closing

     The closing of the Purchase and the transactions relating thereto (collectively, the
“Closing”) shall take place at the offices of DLA Piper Rudnick Gray Cary US LLP, 6225 Smith
Avenue, Baltimore, Maryland 21209 (or, at the request of Purchaser, at the offices of

 

 

counsel to any lender providing financing in connection with the transactions contemplated
hereby or at such other location as the Parties may agree), commencing at 10:00 a.m. local time on
September 22, 2006 or, subject to Section 9.1 below, on the second Business Day following
the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions the respective
Parties shall take at the Closing itself). The date and time of the closing are referred to as the
“Closing Date.” The Closing shall be deemed completed as of 12:01 a.m. Baltimore time on the
morning of the Closing Date.

Section 1.4 Payment of the Purchase Price

     At the Closing, subject to the satisfaction or waiver of each of the conditions specified in
Sections 7.1 and 7.2 below:

     (a) The Purchaser shall pay the Purchase Price, less the Indemnity Escrow Fund; to the Sellers
by wire transfer of immediately available funds pursuant to written instructions delivered by the
Seller Representative to the Purchaser at least two Business Days prior to the Closing and shall
deliver the Indemnity Escrow Fund to the Escrow Agent.

     (b) The Sellers shall deliver to the Purchaser all of the stock certificates representing the
Polk Stock, endorsed in blank or accompanied by duly executed assignment documents.

     (c) At least one Business Day prior to the Closing, Sellers shall cause the Company to pay to
Sellers, in proportion to their respective holdings of Polk Stock, an aggregate amount (and may
cause each Subsidiary of the Company to pay to the Company any necessary component thereof) equal
to Sellers’ good faith estimate of the excess (if any) of (i) the consolidated Cash of the Company
and its Subsidiaries as of the Closing less (ii) an amount estimated to cover outstanding Company
checks issued through such date, the amount of such payment to be subject to the approval of
Purchaser, which approval shall not be unreasonably withheld, conditioned, or delayed. Sellers may
cause (A) the Company to make any such payment to them in the form of a dividend or a redemption
and (B) any Subsidiary of the Company to make any such payment to the Company in the form of a
dividend, a redemption, or an intercompany loan.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     As a material inducement to the Sellers to enter into this Agreement and to sell the Polk
Stock, the Purchaser hereby represents and warrants that, except as set forth on the Purchaser
Disclosure Schedule attached hereto (the “Purchaser Disclosure Schedule”):

Section 2.1 Organization; Corporate Power and Authorization

     The Purchaser is a Florida corporation, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The Purchaser has the requisite corporate
power and authority and all material licenses, permits and authorizations necessary to

2

 

enter into, deliver and carry out its obligations pursuant to each of the Transaction
Documents to which it is a party. The Purchaser’s execution, delivery and performance of each
Transaction Document to which it is a party has been duly authorized by the Purchaser.

Section 2.2 Binding Effect and Noncontravention

     (a) Each Transaction Document to which the Purchaser is a party constitutes, or upon execution
and delivery will constitute, a valid and binding obligation of the Purchaser, enforceable against
it in accordance with its terms, except as such enforceability may be limited by (i) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws affecting creditors’
rights generally, and (ii) applicable equitable principles (whether considered in a proceeding at
law or in equity).

     (b) The execution, delivery and performance by the Purchaser of the Transaction Documents to
which the Purchaser is a party do not and shall not: (i) conflict with or result in a breach of the
terms, conditions, or provisions of, constitute a default under or result in a violation of, or
create in any party the right to accelerate, terminate, modify, or cancel any, liability or
obligation of Purchaser, or charge any fee, penalty, or similar payment to Purchaser, under: (A)
the charter or bylaws of the Purchaser, (B) any agreement to which Purchaser is a party or to which
any of its assets are subject, or (C) any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, Legal Requirement or other restriction of any Government
Entity to which Purchaser or its assets are subject, or (ii) require any authorization, consent,
approval, exemption or other action by or declaration or notice to any third Person or Government
Entity (except for the applicable requirements of the HSR Act).

Section 2.3 Brokerage

     The Purchaser has no liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement.

Section 2.4 Financial Ability

     The Purchaser acknowledges that this Agreement has no financing contingency. The Purchaser
has delivered to Sellers a true and complete copy of a commitment letter, dated August 1, 2006 (the
“Financing Agreement”), pursuant to which Canadian Imperial Bank of Commerce and JPMorgan Chase
Bank, N.A. have committed, subject to the terms and conditions set forth therein, to make available
to the Purchaser an additional credit facility of $141.0 million. The aggregate proceeds
contemplated by the Financing Agreement, together with other available funds, are in an amount
sufficient to consummate the transactions contemplated hereby, including to pay the Purchase Price
and to pay related fees and expenses. As of the date hereof, the Financing Agreement has not been
withdrawn and Purchaser does not know of any facts or circumstances that are reasonably expected to
result in any of the conditions set forth in the Financing Agreement not being satisfied. Canadian
Imperial Bank of Commerce and JPMorgan Chase Bank, N.A. have indicated to Purchaser in writing that
syndication of the loans to be issued under the Financing Agreement is not a condition to closing
thereunder.

3

 

Section 2.5 No Litigation

     There is no lawsuit, claim, action, proceeding or investigation pending or, to the Purchaser’s
knowledge, threatened against the Purchaser, its properties or businesses, which is reasonably
expected to have a Purchaser Material Adverse Effect or restrict the ability of the Purchaser to
consummate the transactions contemplated hereby and otherwise perform hereunder.

Section 2.6 Investment

     The Purchaser is acquiring the Polk Stock for its own account, for investment only, and not
with a view to any resale or public distribution thereof. The Purchaser shall not offer to sell or
otherwise dispose of the Polk Stock in violation of any Legal Requirement applicable to any such
offer, sale or other disposition. The Purchaser acknowledges that (a) the Polk Stock has not been
registered under the Securities Act, or any state securities laws, (b) there is no public market
for the Polk Stock and there can be no assurance that a public market will develop, and (c) the
Purchaser must bear the economic risk of its investment in the Polk Stock for an indefinite period
of time. The Purchaser is an “accredited investor” within the meaning of Rule 501 under the
Securities Act, as presently in effect.

Section 2.7 Accuracy on Closing Date

     Each representation and warranty set forth in this Article II and all information
contained in any certificate delivered by or on behalf of the Purchaser pursuant to this Agreement
shall be true and correct as of the time of the Closing as though then made, except (a) as affected
by the transactions expressly contemplated by this Agreement, and (b) to the extent that such
representation and warranty relates specifically to an earlier date.

Section 2.8 Acknowledgement by the Purchaser

     In determining to proceed with the transaction contemplated by this Agreement, the Purchaser
acknowledges that (a) the Purchaser has made a due diligence review of the Company and its
Subsidiaries and is satisfied with the results thereof and (b) except as expressly set forth
herein, the Purchaser is not relying on any covenants, representations or warranties of the Company
or the Sellers.

Section 2.9 No Knowledge of Company Breaches

     To Purchaser’s actual knowledge, on the date hereof, the representations and warranties of
Sellers and the Company are true and correct in all material respects (except for those
representations and warranties qualified for materiality, which, to Purchaser’s actual knowledge,
are true and correct in all respects).

4

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

     As a material inducement to the Purchaser to enter into this Agreement and to buy the Polk
Stock, each Seller hereby represents and warrants, severally and not jointly, that, except as set
forth on the Seller Disclosure Schedule attached hereto (the “Seller Disclosure Schedule”):

Section 3.1 Authorization

     Such Seller has full power and authority necessary to enter into, deliver and perform its
obligations pursuant to each of the Transaction Documents to which it is a party.

Section 3.2 Binding Effect and Noncontravention

     (a) Each Transaction Document to which such Seller is a party constitutes, or upon execution
and delivery will constitute, a valid and binding obligation of such Seller, enforceable against it
in accordance with its terms, except as such enforceability may be limited by (i) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws affecting creditors’
rights generally, and (ii) applicable equitable principles (whether considered in a proceeding at
law or in equity).

     (b) The execution, delivery and performance by such Seller of the Transaction Documents to
which such Seller is a party do not and shall not (i) conflict with or result in a breach of the
terms, conditions, or provisions of, constitute a default under or result in a violation of, or
create in any party the right to accelerate, terminate, modify, or cancel any, liability or
obligation of such Seller, or charge any fee, penalty, or similar payment to such Seller, under:
(A) the charter or bylaws of such Seller, if applicable, (B) any agreement to which such Seller is
a party or to which any of its assets are subject, or (C) any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, Legal Requirement or other restriction
of any Government Entity to which such Seller or its assets are subject, or (ii) require any
authorization, consent, approval, exemption or other action by or declaration or notice to any
third Person or Government Entity (except for the applicable requirements of the HSR Act).

Section 3.3 Capital Stock

     Such Seller holds of record, owns beneficially and has good and marketable title to all of
such Seller’s Polk Stock set forth on Section 3.3 of the Seller Disclosure Schedule and 4.3 of the
Disclosure Schedule, free and clear of security interests, options, warrants, purchase rights,
contracts, commitments, equities, claims or demands of any kind, except as set forth in the
Stockholders’ Agreement dated November 22, 2002 by and among the Company and each of the
stockholders listed in Exhibit A attached thereto (the “Stockholders’ Agreement”), which
Stockholders’ Agreement shall be terminated prior to the Closing. Such Seller is not a party to
any voting trust, proxy, or other agreement or understanding with respect to the voting of any Polk
Stock which will survive the Closing Date. Upon delivery to the Purchaser at the Closing of
certificates representing the Polk Stock, accompanied by stock powers duly endorsed in

5

 

blank, good and valid title to the Polk Stock will pass to Purchaser, free and clear of all
liens or restrictions of any kind, other than those arising from acts of the Purchaser.

Section 3.4 Accuracy on Closing Date

     Each representation and warranty set forth in this Article III and all information
contained in any certificate delivered by or on behalf of such Seller pursuant to this Agreement
shall be true and correct in all material respects as of the time of the Closing as though then
made, except (a) as affected by the transactions expressly contemplated by this Agreement and (b)
to the extent that such representation and warranty relates specifically to an earlier date.

Section 3.5 No Knowledge of Company Breaches

     To such Seller’s actual knowledge, on the date hereof, the representations and warranties of
the Company and each other Seller are true and correct in all material respects (except for those
representations and warranties qualified for materiality, which, to such Seller’s actual knowledge,
are true and correct in all respects).

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     As a material inducement to the Purchaser to enter into this Agreement and to purchase the
Polk Stock, the Company hereby represents and warrants to the Purchaser, that, except as set forth
on the Disclosure Schedule attached hereto (the “Disclosure Schedule”):

Section 4.1 Organization; Qualification and Corporate Power

     Each of the Company and its Subsidiaries is a corporation or limited liability company, as
applicable, validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, as applicable. Each of the Company and its Subsidiaries is duly
authorized to conduct business and is in good standing under the laws of each jurisdiction where
such qualification is required, except where the lack of such qualification is not reasonably
expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries has full
corporate power and authority or limited liability company power and authority, as applicable, to
carry on the businesses in which it is engaged and to own and use the properties owned and used by
it.

Section 4.2 Approvals and Consents

     (a) Each Transaction Document to which the Company or its Subsidiaries is a party constitutes,
or upon execution and delivery will constitute, a valid and binding obligation of the Company or
its Subsidiaries, as applicable, enforceable against such party in accordance with its terms,
except as such enforceability may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors’ rights generally, and (ii)
applicable equitable principles (whether considered in a proceeding at law or in equity).

6

 

     (b) The execution, delivery, and performance by the Company and the Subsidiaries of the
Transaction Documents to which any of the Company or its Subsidiaries is a party do not and shall
not: (i) conflict with or result in a breach of the terms, conditions, or provisions of, constitute
a default under or result in a violation of, or create in any party the right to accelerate,
terminate, modify, or cancel any, liability or obligation of the Company or any Subsidiaries, or
charge any fee, penalty, or similar payment to the Company or any Subsidiary, under: (A) the
certificate of incorporation or bylaws or similar corporate governance documents of the Company or
any of its Subsidiaries, (B) any material agreement to which any of the Company or any of its
Subsidiaries is a party or to which any of their respective assets are subject, or (C) any
constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, Legal
Requirement or other restriction of any Government Entity to which any of the Company or any of its
Subsidiaries or any of their assets are subject or (ii) require any authorization, consent,
approval, exemption or other action by or declaration or notice to any third Person or Government
Entity (except for the applicable requirements of the HSR Act).

Section 4.3 Capitalization; Subsidiaries

     (a) The entire authorized capital stock of the Company consists of 20,000,000 shares of Common
Stock, of which 1,170,000 shares are issued and outstanding on the date hereof. All of the issued
and outstanding shares of the Company have been duly authorized, are validly issued, fully paid,
and nonassessable, and are held of record and beneficially by the Sellers as set forth on Section
4.3 of the Disclosure Schedule. On the date hereof, there are options outstanding to acquire up to
20,000 shares of Common Stock (the “Options”). Other than the Options, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation or similar rights with respect
to the Company. Section 4.3 of the Disclosure Schedule sets forth a true and complete list of all
Options, including (i) the name of the holder thereof, (ii) the number of shares of Common Stock
subject thereto, (iii) the per share exercise price, (iv) the date of grant, and (v) any applicable
vesting schedule.

     (b) None of the Company and its Subsidiaries controls directly or indirectly or has any direct
or indirect equity participation in any corporation, partnership, trust, or other business
association which is not a Subsidiary of the Company. The Disclosure Schedule sets forth for each
Subsidiary of the Company (i) its name and jurisdiction of incorporation or formation, as
applicable, (ii) the number of shares of authorized capital stock of each class of its capital
stock or membership interests, as applicable, (iii) the number of issued and outstanding shares or
membership interests, as applicable, of each class of its capital stock or membership interests, as
applicable, the names of the holders thereof, and the number of shares or membership interests, as
applicable, held by each such holder, and (iv) the number of shares or membership interests, as
applicable, of its capital stock or membership interests, as applicable, held in treasury. All of
the issued and outstanding shares of capital stock or membership interests, as applicable, of each
Subsidiary of the Company have been duly authorized and are validly issued, fully paid, and
nonassessable. Each of the Company and its Subsidiaries holds of record, owns beneficially and has
good and marketable title to all of the

7

 

outstanding shares or membership interests, as applicable, of each Subsidiary of the Company.
As of the Closing, such shares or membership interests, as applicable, shall be free and clear of
any restrictions on transfer, security interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands (other than restrictions under the Securities Act and
state securities laws). There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or commitments that
could require any of the Subsidiaries of the Company to issue, sell or otherwise cause to become
outstanding any of such Subsidiary’s own capital stock or membership interests, as applicable.
There are no outstanding or authorized stock appreciation, phantom stock, profit participation or
similar rights with respect to any Subsidiary of the Company. Except as set forth in the
Stockholders’ Agreement, which shall be terminated prior to the Closing, there are no voting
trusts, proxies, or other agreements or understandings with respect to the voting of any capital
stock or membership interests, as applicable, of any of the Company and its Subsidiaries.

Section 4.4 Financial Statements

     (a) Attached hereto as Exhibit B are the following financial statements for the
Company (collectively, the “Financial Statements”): the audited consolidated balance sheets of the
Company and its Subsidiaries as of March 26, 2006 and March 27, 2005, the related consolidated
statements of earnings and comprehensive income, stockholders’ equity, and cash flows for each of
the years in the three-year period ended March 26, 2006, and the unaudited consolidated balance
sheet as of June 25, 2006, and the related consolidated statements of earnings and comprehensive
income, stockholders’ equity, and cash flows for the three-month period ended June 25, 2006.

     (b) Each Financial Statement (including the notes thereto) has been prepared in accordance
with GAAP and fairly presents the consolidated financial position of the Company and its
Subsidiaries as of such dates and the consolidated results of their operations and their cash flows
for each of the periods specified.

     (c) Except for (i) the liabilities reflected on the Latest Balance Sheet, a copy of which is
appended hereto as part of Exhibit B, (ii) trade payables, accrued expenses, purchase contracts and
orders for inventory incurred since the Latest Balance Sheet Date in the ordinary course of
business and liabilities and other obligations incurred in the ordinary course of business since
the Latest Balance Sheet Date and not in violation of this Agreement (it being agreed that
liabilities for violation of Legal Requirements, breach of contract, or tort shall not be deemed
incurred in the ordinary course of business), (iii) executory contract obligations under (x)
Material Contracts listed on Section 4.19 of the Disclosure Schedule, and/or (y) contracts not
required to be listed on Section 4.19 of the Disclosure Schedule, (iv) contingent liabilities
specifically identified on Section 4.4 of the Disclosure Schedule, and (v) items otherwise
disclosed in the Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
material liabilities or obligations (whether accrued, absolute, contingent, known, unknown or
otherwise and whether or not of a nature required to be reflected or reserved against in a balance
sheet prepared in accordance with GAAP), including, but not limited to, liabilities for violation
of Legal Requirements, breach of contract or tort.

8

 

          (d) Since March 26, 2006, neither the Company nor any of its Subsidiaries has (i) other than
as disclosed in Schedule 4.4 to the Disclosure Schedule, accelerated collection of any notes or
accounts receivable in advance of their regular due dates or the dates when they would have been
collected in the ordinary course of business consistent with past practices; (ii) delayed payment
of any accrued expense, trade payable or other liability beyond its due date or the date when such
liability would have been paid in the ordinary course of business consistent with past practices;
or (iii) allowed its levels of inventory to vary in any material respect from the levels
customarily maintained.

Section 4.5 Events Subsequent to the Latest Balance Sheet

     Since the Latest Balance Sheet, there has been no change in the financial condition or
operating results of the Business which is reasonably expected to have a Material Adverse Effect.

Section 4.6 Inventory

     The current inventory of the Company and its Subsidiaries, subject to a reasonable allowance
for obsolete inventory (consistent with the allowances reflected in the Financial Statements), is
good and usable and salable in the ordinary course of business.

Section 4.7 Accounts Receivable

     The accounts receivable of the Company and Subsidiaries set forth in the Financial Statements
arose from bona fide transactions in the ordinary course of the Business and are valid and
enforceable (subject to a reasonable allowance, consistent with past practice, for doubtful
accounts as reflected in the Financial Statements).

Section 4.8 Title to Assets

     The Company has good and marketable title to, or a valid leasehold interest in, the assets
reflected on the Latest Balance Sheet or acquired since the date thereof, except (a) for inventory
(or other assets with an aggregate book value of less than $100,000) disposed of in the ordinary
course of business since the date of the Latest Balance Sheet, (b) all of the outstanding capital
stock and membership interests of Polk Mexico and Polk Investments shall be distributed to Sellers
prior to Closing, and (c) as disclosed on Section 4.8 of the Disclosure Schedule.

Section 4.9 Compliance with Laws

     Other than tax matters addressed in Section 4.10 and environmental matters addressed
in Section 4.11 below, each of the Company and its Subsidiaries has complied with all
material Legal Requirements relating to the operation of the Business. Neither the Company nor any
of its Subsidiaries has received notice alleging any violations of material Legal Requirements
within the last 12 months.

9

 

Section 4.10 Tax Matters

     (a) Each of the Company and its Subsidiaries has filed all Returns that it has been required
to file. All such Returns were correct and complete in all material respects. All Taxes owed by
the Company and each Subsidiary (whether or not shown on any Return and whether or not any Return
was required) have been paid or accrued as liabilities or reserves for liabilities on the Financial
Statements. Neither the Company nor any Subsidiary is currently the beneficiary of any extension of
time within which to file any Return. No claim has ever been made by a taxing authority in a
jurisdiction where the Company or any Subsidiary does not file Returns that it is or may be subject
to taxation by that jurisdiction. There are no liens on any of the assets of the Company that
arose in connection with any failure (or alleged failure) to pay any Tax, except for liens for
Taxes not yet due.

     (b) The Company and each of its Subsidiaries has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party. The Company and each Subsidiary has filed
all federal, state, local and foreign returns and reports with respect to employee Income Tax
withholding, social security, unemployment Taxes and premiums, all in compliance with the
withholding Tax provisions of the Code as in effect for the applicable year and other applicable
federal, state, local or foreign laws.

     (c) No Seller or other director or officer (or employee responsible for Tax matters) of the
Company or any Subsidiary expects any taxing authority to assess any additional Taxes for any
period for which Returns have been filed. There is no dispute or claim concerning any Tax
liability of the Company or any Subsidiary either (i) claimed or raised by any taxing authority in
writing, or (ii) as to which any of the Sellers or other directors or officers (or employees
responsible for Tax matters) of the Company or any Subsidiary has actual knowledge (after
reasonable investigation) based upon personal contact with any agent of such taxing authority. No
issue relating to Taxes has been raised in writing by a taxing authority during any pending audit
or examination, and no issue relating to Taxes was raised in writing by a taxing authority in any
completed audit or examination, that reasonably can be expected to recur in a later taxable period.
The Company has delivered to Purchaser correct and complete copies of all federal Income Tax and
other material Returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company since June 1, 2000.

     (d) Neither the Company nor any Subsidiary has waived any statute of limitations with respect
to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency.

     (e) Neither the Company nor any Subsidiary is a party to any Tax allocation or sharing
agreement. None of the Company nor any Subsidiary (i) has been a member of an Affiliated Group
filing a consolidated federal Income Tax Return other than an Affiliated Group of which the Company
was the common parent (the “Company Group”) or (ii) has any liability for the Taxes of any Person
that was not a member of the Company Group under Treasury Regulation section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor, by contract or
otherwise.

10

 

     (f) The unpaid Taxes of the Company and each Subsidiary (i) did not, as of the most recent
fiscal month end, exceed the reserve for Tax liability (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth on the face of the
Latest Balance Sheet (rather than in any notes thereto) and (ii) will not, immediately prior to
Closing, exceed that reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in filing its Returns.

     (g) Neither the Company nor any Subsidiary is a party to any joint venture, partnership or
other arrangement or contract that could be treated as a partnership for federal Income Tax
purposes.

     (h) Neither the Company nor any Subsidiary has entered into any sale leaseback or leveraged
lease transaction that fails to satisfy the requirements of Revenue Procedure 2001-28 (or similar
provisions of foreign law) or any safe harbor lease transaction.

     (i) Neither the Company nor any Subsidiary has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under section 280G of the Internal Revenue Code. Neither
the Company nor any Subsidiary has been a U.S. real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.

     (j) The Company is, and has been since June 1, 2000, an S corporation as defined in Sections
1361(a)(1) of the Code for federal and state Income Tax purposes and is eligible for such
treatment. Section 4.10 of the Disclosure Schedule contains a copy of the Company’s election to be
treated as an S corporation, which was timely filed with the Internal Revenue Service and has not
been superseded by any subsequent filing. The Internal Revenue Service has not sent any
correspondence to the Company questioning the Company’s status as an S corporation. The Company
has not, since June 1, 2000, acquired assets from another corporation in which the Company’s tax
basis for the acquired assets was determined, in whole or in part, by reference to the tax basis of
the acquired assets (or any other property) in the hands of the transferor.

     (k) Each U.S. Subsidiary is, and has been since the effective date of the Company’s S election
either (i) a qualified subchapter S subsidiary as defined in Section 1361(b)(3)(B) of the Code or a
disregarded entity as defined in Treasury Regulation Section 301.7701-3(b)(1)(ii). Each of the
foreign Subsidiaries does not file a separate United States federal Income Tax return and is not
engaged in a trade or business in the United States within the meaning of Section 864 of the Code.

     (l) Neither the Company nor any Subsidiary will be required to include any items of income in,
or exclude any items of deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any (i) change in method of accounting for a taxable
period ending on or prior to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign Income Tax law); (ii) “closing
agreement” as described in Section 7121 of the Code (or any corresponding or

11

 

similar provision of state, local or foreign Income Tax law); (iii) installment sale or open
transaction made on or prior to the Closing Date; or (iv) prepaid amount received on or prior to
the Closing Date.

     (m) In the past five (5) years, neither the Company nor any Subsidiary has been a party to a
transaction that is reported to qualify as a reorganization within the meaning of Section 368 of
the Code, distributed a corporation in a transaction that is reported to qualify under Section 355
of the Code, or been distributed in a transaction that is reported to qualify under Section 355 of
the Code.

     (n) Neither the Company nor any Subsidiary has engaged in any transaction that could affect
the Income Tax liability for any taxable year not closed by the applicable statute of limitations
which (i) is a “reportable transaction” (irrespective of the effective date) within the meaning of
Treasury Regulation section 301.6011-4(b); or (ii) a “significant purpose of which is the avoidance
or evasion of United States federal income tax” within the meaning of Section 6662(d)(2)(C)(iii) of
the Code. The Company has disclosed on its federal Income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal Income Tax within the meaning of
Section 6662 of the Code. The Company has disclosed on its Returns all positions taken therein
that could reasonably be expected to give rise to a substantial understatement of Tax within the
meaning of Section 6662 of the Code (or any similar provision under any state, local or foreign tax
law).

Section 4.11 Environmental Matters

     (a) The Company and each of its Subsidiaries is in material compliance with all applicable
Environmental Laws;

     (b) The Company and each of its Subsidiaries has obtained and is in material compliance with
all permits, licenses and other authorizations that are required pursuant to Environmental Laws for
the operation of the Business;

     (c) Neither of the Company nor any of its Subsidiaries has received notice of material
violations or liabilities arising under Environmental Laws and relating to the operation of the
Business; and

     (d) Neither of the Company nor any of its Subsidiaries has assumed or undertaken any liability
or corrective or remedial obligation of any other Person arising under Environmental Laws.

Section 4.12 Intellectual Property

     (a) The Disclosure Schedule contains a description of:

     (i) all Intellectual Property owned by any of the Company and its Subsidiaries for
which a patent, trademark or copyright registration exists or has been applied for; and

12

 

     (ii) all licenses of Intellectual Property which any of the Company and its
Subsidiaries has been granted from any third Person and which are material to the operations
of the Business.

     (b) The Company and its Subsidiaries own or otherwise have the right to use, all Intellectual
Property used by them in the conduct of the Business. The Intellectual Property owned or licensed
by the Company is sufficient to conduct the Business as now conducted or contemplated to be
conducted.

     (c) The Company has not received any notice or claim (whether written, oral or otherwise)
challenging its ownership or rights in such Intellectual Property or claiming that any other Person
has any claim of legal or beneficial ownership with respect to the Company’s rights therein.

     (d) The Company’s use of the Intellectual Property does not infringe upon the rights held by
any other Person. To the Company’s Knowledge and except as set forth on Schedule 4.12(d) of the
Disclosure Schedule, no other Person is infringing in any respect on any part of the Intellectual
Property.

     (e) The Company has taken all reasonable steps to (i) protect its rights to the Intellectual
Property and (ii) to prevent the unauthorized use of the Intellectual Property by any other Person.

Section 4.13 Real Estate

     (a) The Company does not own any real property.

     (b) Section 4.13(b) of the Disclosure Schedule lists all real property that each of the
Company and its Subsidiaries leases or subleases from any other Person (the “Leased Premises”).
With respect to each lease and sublease listed or required to be listed on Section 4.13(b) of the
Disclosure Schedule, the lease or sublease is legal, valid, binding, enforceable (except as such
enforceability may be limited by (i) applicable insolvency, bankruptcy, reorganization, moratorium
or other similar laws affecting creditors’ rights generally, and (ii) applicable equitable
principles (whether considered in a proceeding at law or in equity)), and in full force and effect.
The portions of the buildings located on the Leased Premises that are used in the business of the
Company are in good repair and condition, normal wear and tear excepted, and are in the aggregate
sufficient to satisfy the Company’s business activities as conducted thereon. Neither the Company
nor any of its Affiliates has received notice of any violations of material building codes and/or
zoning ordinances or other material governmental regulations with respect to the Leased Premises.

     (c) Section 4.13(c) of the Disclosure Schedule lists all real property that each of the
Company and its Subsidiaries leases or subleases to any other Person. With respect to each lease
or sublease listed or required to be listed on Section 4.13(c) of the Disclosure Schedule, the
lease or sublease is legal, valid, binding, enforceable (except as such enforceability may be
limited by (i) applicable insolvency, bankruptcy, reorganization, moratorium or other similar

13

 

laws affecting creditors’ rights generally, and (ii) applicable equitable principles (whether
considered in a proceeding at law or in equity)), and in full force and effect.

Section 4.14 Certain Litigation

     Except as disclosed in Section 4.14 of the Disclosure Schedule, neither the Company nor any of
its Subsidiaries (a) is subject to any outstanding injunction, judgment, order or decree, (b) is a
party to any suit which has been filed, (c) to the Company’s Knowledge, is subject to claims that
are threatened or unasserted but considered probable of assertion, or (d) is a party to any
proceeding, hearing, or investigation of, in or before any court of quasi judicial or
administrative agency of any federal, state, local or foreign jurisdiction, in each case, which
relate to or involved more than $75,000 individually or $350,000 in the aggregate.

Section 4.15 Employee Benefits

     Section 4.15 of the Disclosure Schedule lists each Employee Benefit Plan that any of the
Company or any of its Subsidiaries maintains or to which any of the Company or its Subsidiaries
contributes or has an obligation to contribute, and:

     (a) Each such Employee Benefit Plan complies in form and in operation in all material respects
with its terms and the applicable requirements of ERISA and the Code.

     (b) With respect to each such Employee Benefit Plan, all required payments, premiums,
contributions, distributions, or reimbursements for all periods ending prior to or as of the
Closing Date have been made or properly accrued.

     (c) Each such Employee Benefit Plan which is intended to be qualified under Section 401(a) of
the Code (i) has been amended to reflect the changes in law imposed by GUST and EGTRRA, (ii) has
received a determination letter from the IRS to the effect that it meets the requirements of
Section 401(a) of the Code or may rely on an opinion or advisory letter issued to a master or
prototype or volume submitter provider with respect to the tax-qualified status of the Employee
Benefit Plan, and (iii) nothing has occurred since the date of such determination that is
reasonably expected to cause the Employee Benefit Plan to lose its tax-qualified status.

     (d) Neither the Company nor any of its Subsidiaries maintains, sponsors, contributes to, or
has any Liability under or with respect to any (i) “multiemployer plan” within the meaning of
Section 3(37) of ERISA or any “defined benefit plan” within the meaning of Section 3(35) of ERISA
or otherwise has any Liabilities or potential Liabilities under Title IV of ERISA, (ii)
self-insured health or medical plan, (iii) Employee Benefit Plan subject to the laws of a country
other than the United States of America, or (iv) employee pension benefit plan in which securities
of the Company or any Subsidiary is held as a plan asset.

     (e) None of the Employee Benefit Plans (i) requires the Company or any of its Subsidiaries to
provide health, accident or life insurance benefits to retirees other than in accordance with
Section 4980B of the Code, (ii) is subject to any claims other than routine

14

 

claims for benefits, or (iii) is subject to any audit or investigation by any Government
Entity, including, but not limited to, the Internal Revenue Service or the Department of Labor.

     (f) The Company has delivered or made available to the Purchaser with respect to each Employee
Benefit Plan correct and complete copies of (i) all plan documents pursuant to which the plan is
maintained, funded and administered, including trust agreements, insurance policies and service
agreements, and all amendments to such documents, (ii) the current summary plan description and all
summaries of material modification issued since the publication of such summary plan description,
(iii) the most recent IRS determination letter, opinion or advisory letter, if applicable, and (iv)
the most recent Form 5500 Annual Report and related schedules.

     (g) Except as set forth on Section 4.15 of the Disclosure Schedule, and except as expressly
required or provided by this Agreement, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not result (either alone or in connection with any other
circumstance or event) in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits, or obligation to fund
benefits with respect to any employee of the Company or any Subsidiary. The Company plans to pay
certain pre-Closing bonuses to certain of its employees as disclosed on Section 4.15 of the
Disclosure Schedule.

Section 4.16 Affiliate Transactions

     Except as listed on Section 4.16 of the Disclosure Schedule, no officer, director, employee,
shareholder or Affiliate of any of the Company or its Subsidiaries or any individual related by
blood, marriage or adoption to any such individual or any entity in which any such Person or
individual owns any beneficial interest, is a party to any agreement, contract, commitment or
transaction with any of the Company or its Subsidiaries or has any material interest in any
material property used by any of the Company or its Subsidiaries. None of the Sellers or any other
Affiliate of the Company is indebted to the Company for money borrowed or other loans or advances,
and the Company is not indebted to any such Affiliate.

Section 4.17 Insurance

     The Disclosure Schedule contains a description of each insurance policy maintained by the
Company and its Subsidiaries with respect to its properties, assets and business. All such
insurance is in full force on the date of this Agreement.

Section 4.18 Employees

     The Company is not bound by or subject to (and none of its property or assets is bound by or
subject to) any written or oral, express or implied, contract with any labor union, and no labor
union is representing or, to the Company’s Knowledge, is seeking to represent any of the employees,
representatives or agents of the Company. There is not presently pending or existing, and there is
not threatened, (a) any strike, slowdown, walkout, picketing, work stoppage, labor arbitration or
other proceeding in respect of the grievance of any employee against or affecting the Company, (b)
any application or complaint filed by any employee or

15

 

union with the National Labor Relations Board or any comparable Government Entity against or
affecting the Company, (iii) any organizational activity or other labor dispute against or
affecting the Company, and no application for certification of a collective bargaining agreement is
pending or is threatened. There is no allegation, charge, complaint or proceeding pending or
threatened by any Person against the Company or any of its current or former officers, directors or
employees relating to employment, equal employment opportunity, discrimination, harassment,
wrongful discharge, unfair labor practices, immigration, wages, hours, benefits, collective
bargaining, the payment of social security or similar Taxes, occupational safety and health or
plant closing. The Company is in material compliance with all applicable laws relating to
employment practices, classification of employees (both as employees rather than consultants and as
non-exempt rather than exempt), terms and conditions of employment, wages and hours, equal
employment opportunity, and the payment of social security and similar Taxes, and the Company is
not engaged in any unfair labor practice.

Section 4.19 Contracts

     (a) Except as expressly contemplated by this Agreement or as set forth on Section 4.19 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to or bound by any
written or oral:

          (i) pension, profit sharing, stock option, employee stock purchase, employment, bonus,
incentive, or other plan or arrangement providing for deferred or other compensation to its current
or former directors, officers or employees or any other employee benefit plan, arrangement or
practice, whether formal or informal;

          (ii) collective bargaining agreement or any other contract with any labor union, or severance
agreements, programs, policies or arrangements;

          (iii) employment, consulting, management, or similar agreement or contract for the employment
of any officer, individual employee or other Person on a full-time, part-time, consulting or other
basis (A) providing annual cash or other compensation in excess of $100,000, (B) providing for the
payment of any cash or other compensation or benefits upon the consummation of the transactions
contemplated hereby or (C) otherwise restricting its ability to terminate the employment of any
employee at anytime for any lawful reason or for no reason, in each case, without penalty or
liability;

          (iv) contract or agreement involving any Government Entity;

          (v) agreement or indenture relating to borrowed money or other indebtedness or the mortgaging
or pledging of any material asset;

          (vi) lease or agreement under which the Company is (A) lessee of or holds or operates any
personal property owned by any other party, except for any lease of personal property under which
the aggregate annual rental payments do not exceed $50,000 or (B) lessor of or permits any third
Person to hold or operate any property, real or personal, owned or controlled by any of the Company
or its Subsidiaries;

16

 

          (vii) contract relating to the marketing, sale, advertising or promotion of its products,
where such contract involves a fee or payment by any of the Company and its Subsidiaries in excess
of $100,000, other than trade promotion offers between the Company or any of its Subsidiaries and
their respective customers entered into in the ordinary course of business;

          (viii) any contract or agreement with any customer or supplier set forth or required to be set
forth on Section 4.22 of the Disclosure Schedule; or

          (ix) other agreement which involves a consideration in excess of $100,000 annually and not in
the ordinary course of business.

     (b) To the Company’s Knowledge, all of the contracts, agreements and instruments set forth or
required by this Section 4.19 to be set forth on the Disclosure Schedule (the “Material
Contracts”) are valid, binding and enforceable in accordance with their respective terms, except as
designated completed on such schedule and except as such enforceability may be limited by (i)
applicable insolvency, bankruptcy, reorganization, moratorium or other similar laws affecting
creditors’ rights generally or (ii) applicable equitable principles (whether considered in a
proceeding at law or in equity). None of the Company or its Subsidiaries has materially defaulted
under or materially breached any Material Contract; to the Company’s Knowledge, no other party to a
Material Contract has breached or cancelled any Material Contract.

     (c) The Purchaser has been supplied with a true, correct, and complete copy of each written
Material Contract, together with all amendments, waivers or other changes thereto.

Section 4.20 Products; Product Warranties

     (a) The form of each product warranty relating to products currently manufactured or sold by
the Company and its Subsidiaries is consistent with industry standards.

     (b) The Disclosure Schedule sets forth a true and complete list, of all products manufactured
by the Company or the Subsidiaries that have been recalled or withdrawn (whether voluntarily or
otherwise) at any time during the past three (3) years.

     (c) The Company is not aware of any material defect in design, materials, manufacture or
otherwise in any products heretofore or currently manufactured by the Company or the Subsidiaries
or any defect in repair to or replacement of any such products which could give rise to any
material claim.

     (d) The Financial Statements reflect all material warranty and other unreimbursed repair,
maintenance and replacement expenses (including parts and labor, but no overhead) known by the
Company or the Subsidiaries with respect to products previously sold by them for the relevant
periods.

17

 

Section 4.21 Broker Fees

     Except as set forth in Section 4.21 of the Disclosure Schedule, none of the Company or any of
its Subsidiaries has any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement.

Section 4.22 Suppliers and Customers

     Section 4.22 of the Disclosure Schedule sets forth (a) the ten principal suppliers of the
Company during each of the fiscal years ended March 27, 2005 and March 26, 2006, together with the
approximate dollar amount of goods purchased by the Company from each such supplier during each
such period, and (b) the ten principal customers of the Company during each of the fiscal years
ended March 27, 2005 and March 26, 2006, together with the approximate dollar amount of goods
and/or services sold by the Company to each such customer during each such period. Except as
otherwise set forth in Section 4.22 of the Disclosure Schedule, the Company maintains good
relations with all suppliers and customers listed or required to be listed in Section 4.22 of the
Disclosure Schedule, and no such party has canceled, terminated or made any threat to the Company
to cancel or otherwise terminate its relationship with the Company or to materially decrease its
services or supplies to the Company or its direct or indirect purchase or usage of the products or
services of the Company.

Section 4.23 Absence of Certain Business Practices

     Except as set forth on Schedule 4.23 of the Disclosure Schedule, neither the Company, the
Sellers nor any other Affiliate or agent of the Company, or any other person acting on behalf of or
associated with the Company, acting alone or together, has (a) received, directly or indirectly,
any rebates, payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, employee or agent of any customer
or supplier; or (b) directly or indirectly given or agreed to give any money, gift or similar
benefit to any customer, supplier, employee or agent of any customer or supplier, any official or
employee of any government (domestic or foreign), or any political party or candidate for office
(domestic or foreign), or other person who was, is or may be in a position to help or hinder the
business of the Company (or assist the Company in connection with any actual or proposed
transaction), in each case which (i) could reasonably be expected to subject the Company or any of
its Subsidiaries to any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, could reasonably be expected to have had an adverse
effect on the assets, business, operations or prospects of the Company or any of its Subsidiaries,
or (iii) if not continued in the future, could reasonably be expected to adversely affect the
assets, business, operations or prospects of the Company or any of its Subsidiaries.

Section 4.24 Accuracy on Closing Date

     Each representation and warranty set forth in this Article IV and all information
contained in any certificate delivered by or on behalf of the Company pursuant to this Agreement
shall be true and correct as of the time of the Closing as though then made, except

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(a) as affected by the transactions expressly contemplated by this Agreement and (b) to the
extent that such representation and warranty relates specifically to an earlier date.

Section 4.25 No Additional Representations

     EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS ARTICLE IV, THE COMPANY EXPRESSLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE
CONDITION, VALUE OR QUALITY OF THE BUSINESS OR THE ASSETS OF THE BUSINESS. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS ARTICLE IV, THE COMPANY SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT
TO THE ASSETS OF THE BUSINESS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE
ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT.

ARTICLE V.

COVENANTS AND OTHER AGREEMENTS

     The Parties agree as follows:

Section 5.1 General

     From the date of this Agreement through the Closing or the earlier termination of this
Agreement, each of the Parties shall use its commercially reasonable efforts to take all action and
to do all things necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in Article VII below).

Section 5.2 Operation of the Business

     From the date of this Agreement through the Closing or the earlier termination of this
Agreement, the Company shall conduct the Business in the ordinary course in accordance with past
practice, except that the Company shall have the right to: (a) make payments to debtholders outside
the ordinary course of business, (b) make distributions to shareholders as contemplated by Section
1.4(c), (c) pay the bonuses to employees as set forth on Section 4.15 to the Disclosure Schedule,
and (d) take other actions contemplated by the Transaction Documents, including distributing to
Sellers all of the stock of Polk Mexico and all of the interests of Polk Investments. The Company
and the Sellers shall keep the Purchaser reasonably advised as to all material operations and
proposed material operations relating to the Company. The Company shall use all reasonable
commercial efforts to (i) keep available the services of present employees and to preserve the
present relationships of the Company with persons having significant business relations therewith,
(ii) keep all Material Contracts in full force and effect, (iii) maintain in force until the
Closing Date insurance policies equivalent to those in effect on the date hereof, and (iv) comply
in all material respects with all applicable Legal Requirements.

19

 

Section 5.3 General Restrictions

     From the date of this Agreement through the Closing or the earlier termination of this
Agreement, except as otherwise expressly permitted in this Agreement or expressly contemplated in
connection with the transactions herein, without the prior written consent of the Purchaser, which
consent shall not be unreasonably withheld, neither the Company nor any of its Subsidiaries shall:

     (a) merge into or with or consolidate with, any other corporation or acquire the business or
assets of any person;

     (b) except as permitted by Section 1.4(c), purchase any securities of any person;

     (c) amend its charter or bylaws;

     (d) except for the issuance of Common Stock upon exercise of currently outstanding Options,
issue any capital stock or other securities, or grant, or enter into any agreement to grant, any
options, convertibility rights, other rights, warrants, calls or agreements relating to its
securities;

     (e) create, incur, assume, guarantee or otherwise become liable or obligated with respect to
any indebtedness, or make any loan or advance to, or any investment in, any person, except in each
case in the ordinary course of business;

     (f) make any change in any existing election, or make any new election, with respect to any
tax law in any jurisdiction which election could have an effect on the tax treatment of the Company
or the Company’s business operations;

     (g) except in the ordinary course of business consistent with past practice, enter into, amend
or terminate any material agreement (including any of the arrangements described in Section
4.19(a), whether written or oral);

     (h) sell, transfer, lease, mortgage, encumber or otherwise dispose of, or agree to sell,
transfer, lease, mortgage, encumber or otherwise dispose of, any properties except in the ordinary
course of business;

     (i) settle any material claim or litigation, or file any material motions, orders, briefs or
settlement agreements in any proceeding before any Government Entity or any arbitrator;

     (j) other than in the ordinary course of business consistent with past practices, incur or
approve, or enter into any agreement or commitment to make, any expenditures in excess of $100,000;

     (k) maintain its books of account other than in the usual, regular and ordinary manner in
accordance with generally accepted accounting principles and on a basis consistent with prior
periods or make any change in any of its accounting methods or practices;

20

 

     (l) make any material change, whether written or oral, to any agreement or understanding with
any of the suppliers or customers listed or required to be listed on Section 4.22 of the Disclosure
Schedule;

     (m) accelerate or delay collection of any notes or accounts receivable in advance of or beyond
their regular due dates or the dates when they would have been collected in the ordinary course of
business consistent with past practices;

     (n) delay or accelerate payment of any accrued expense, trade payable or other liability
beyond or in advance of its due date or the date when such liability would have been paid in the
ordinary course of business consistent with past practices;

     (o) allow its levels of inventory to vary in any material respect from the levels customarily
maintained;

     (p) adopt any Employee Benefit Plan or increase the compensation payable to any employee
(including, without limitation, any increase pursuant to any bonus, profit-sharing or other
incentive plan or commitment), other than the Company’s plans to provide a total increase in annual
compensation of $55,000 to five non-management employees (names and amounts listed on Section 5.3
of the Disclosure Schedule) and pay the bonuses referenced in Section 5.2(d);

     (q) engage in any one or more activities or transactions outside the ordinary course of
business;

     (r) enter into any transaction or make any commitment which could reasonably be expected to
result in any of the representations, warranties or covenants of the Company and/or Seller
contained in this Agreement not being true and correct after the occurrence of such transaction or
event; or

     (s) commit to do any of the foregoing.

Section 5.4 Access to Records

     Prior to the Closing but subject to the termination of this Agreement, subject to the terms of
the Confidentiality Agreement, the Company shall permit the Purchaser to have access at reasonable
times, and in a manner so as not to interfere unreasonably with the normal business operations of
the Company, to all books, records (including tax records), contracts, and documents of or
pertaining to the Business and to all employees and agents of the Company.

Section 5.5 Intentionally Left Blank

Section 5.6 No Shop

     From the date of this Agreement until the earlier of (a) the Closing Date, or (b) the
termination of this Agreement, the Company and the Sellers shall not, and the Company and the
Sellers shall cause the Company’s stockholders, officers, directors, employees and other

21

 

agents not to, directly or indirectly, take any action to solicit, initiate or encourage any
offer or proposal or indication of interest in a merger, consolidation, purchase of Polk Stock, or
other business combination involving any equity interest in, or a substantial portion of the assets
of the Company, other than in connection with the transactions contemplated by this Agreement. The
Company shall immediately notify the Purchaser of the receipt of any such offer, proposal or
indication of interest that it receives or otherwise becomes aware of, but not respond to such
offer except as permitted by Purchaser, provided, however, that the Company shall
not divulge to Purchaser the details of such offer, including the identity of the offeror or
pricing or other terms of the offer.

Section 5.7 HSR Act

     In connection with the transactions contemplated by this Agreement, the Parties shall comply
promptly with the notification and reporting requirements of the HSR Act and use all commercially
reasonable efforts to obtain early termination of the waiting period under the HSR Act. The
Parties shall substantially comply with any additional requests for information, including requests
for production of documents and production of witnesses for interviews or depositions, by any
antitrust authority. The Parties will cooperate and use their respective commercially reasonable
efforts in taking steps to ensure compliance with the HSR requirement. The Purchaser shall pay all
required HSR Act filing fees; provided, however, that in the event this Agreement is terminated
pursuant to Section 9.1(b), then the Company shall reimburse Purchaser for 50% of such
filing fees.

Section 5.8 Cooperation with Respect to Financing

     The Company agrees to provide, at Purchaser’s sole cost and expense, and shall cause its
executive officers to provide, commercially reasonable cooperation in connection with the
arrangement of Purchaser’s debt financing for the transactions contemplated by this Agreement,
including without limitation, (a) upon reasonable notice and at reasonable times, making officers
reasonably available to participate in lender meetings, and due diligence sessions, (b) cooperating
in Purchaser’s preparation of bank/lender presentations, offering memoranda, and similar documents,
(c) provided that no Company obligations arise unless there is a Closing hereunder, executing and
delivering any pledge and security documents, other definitive financing documents or other
reasonably requested certificates or documents, and (d) using reasonable commercial efforts to
obtain comfort letters of accountants and legal opinions as may be reasonably requested by
Purchaser; provided, however, that nothing in this Section 5.8 shall require the Company or
any Subsidiary to (i) incur any financial obligation prior to the Closing, or (ii) engage in any
activities that could reasonably be expected to interfere in any material respect with the
operation of the Business.

Section 5.9 Stock Options

     The Company shall take all necessary action to cancel, at or prior to the Closing Date, each
outstanding Option not exercised simultaneously with or prior to the Closing. The Company shall
deliver to Purchaser copies of all documentation evidencing such cancellation, as well as all
documentation relating to any exercises of an outstanding Option.

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Section 5.10 Further Assurances

     From and after the Closing, the Purchaser and each of the Sellers shall execute and deliver
such further instruments of conveyance and transfer and take such other action as reasonably may be
necessary to further effectuate the transactions contemplated by the Transaction Documents.

Section 5.11 Record Retention

     The Parties agree that for a period of seven (7) years after the Closing Date, without the
prior written consent of the Seller Representative, neither the Purchaser nor any of its Affiliates
shall dispose of or destroy any of the books and records purchased hereunder which may be relevant
to any legal, regulatory or Tax audit, investigation, inquiry or requirement of any of the Sellers
without first offering such records to the Sellers.

Section 5.12 Intentionally Left Blank

Section 5.13 Employee Matters

     (a) The Purchaser shall maintain for a period of one (1) year after the Closing Date, without
interruption, medical, health and dental benefits for current employees who continue employment
with the Company or any of its Subsidiaries or with the Purchaser or any of its Subsidiaries or
related companies after the Closing Date and for Polk and Klopfer, hereinafter defined, whether or
not they are Company employees or consultants (collectively, the “Transferred Employees”), that are
substantially similar in the aggregate to those provided by the Company and its Subsidiaries as in
effect on the Closing Date. The Purchaser agrees to honor all Employee Benefit Plans pursuant to
their terms. Transferred Employees shall be given credit for all service with the Company or its
Subsidiaries (and other service credited by the Company or its Subsidiaries for similar plans,
programs or policies) under (i) all employee compensation and benefit plans, programs and policies
and fringe benefits of the Purchaser or any of its Subsidiaries or related companies in which such
Transferred Employees become participants for purposes of eligibility, vesting and benefit accrual
(other than the benefit accrual under tax-qualified defined benefit plans which would provide a
duplication of benefits to such employees) and (ii) severance plans for purposes of calculating the
amount of each such Transferred Employee’s severance benefits.

     (b) In the event the Purchaser terminates any medical, health or dental benefits after the
one-year period referred to in subsection (a) above, the Purchaser shall use its best commercial
efforts to cause each medical, health or dental plan of the Purchaser or any of its Subsidiaries or
related companies to waive any preexisting condition limitations for conditions covered under the
applicable medical, health or dental plans of the Company or any of its Subsidiaries.

     (c) Vacation entitlement accrued but not utilized by a Transferred Employee for the year in
which the Closing Date occurs under the vacation policy of the Company or any of its Subsidiaries
by which such Transferred Employee is employed as in effect on the Closing Date

23

 

shall be recognized by the Purchaser, the Company and each of their Subsidiaries and related
companies following the Closing Date.

     (d) Notwithstanding any other provision of this Agreement, no Company employee shall have any
right to enforce the Purchaser’s obligations pursuant to this Section 5.13, provided,
however, that the Sellers shall have the right to enforce obligations of Purchaser to Sellers under
this Section 5.13), and provided, further, that the Sellers acknowledge and
agree that the Company’s Long-Term Incentive Plan is being replaced by the Purchaser equity
arrangements contemplated by Section 5.19 and Exhibit G.

Section 5.14 Tax Matters

     The following provisions shall govern the allocation of responsibility as between the
Purchaser, the Company and the Sellers for certain Tax matters following the Closing Date:

     (a) Tax Periods Ending on or Before the Closing Date. The Sellers shall prepare or
cause to be prepared and file or cause to be filed all Returns for the Company related to Income
Tax for all periods ending on or prior to the Closing Date which are filed after the Closing Date.
The Company shall prepare or cause to be prepared and file or cause to be filed all Returns (other
than Returns related to Income Tax) for the Company for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. The Seller Representative shall permit the
Purchaser at least twenty (20) Business Days during which to review and comment on each such Tax
Return described in the preceding sentence prior to filing.

     (b) Tax Periods Beginning Before and Ending After the Closing Date. The Purchaser
shall prepare or cause to be prepared and file or cause to be filed any Returns of the Company for
Tax periods which begin before the Closing Date and end after the Closing Date. The Purchaser
shall permit the Seller Representative at least twenty (20) Business Days during which to review
and comment on each such Tax Return described in the preceding sentence prior to filing. For
purposes of this Section, in the case of any Straddle Period, as defined below, the portion of any
Tax which relates to the portion of such Taxable period ending on the Closing Date (the
“Pre-Closing Portion”) shall (x) in the case of any Taxes other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Tax for the entire Taxable period multiplied
by a fraction the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire Taxable period, any
(y) in the case of any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the Closing Date. Any
credits relating to a Straddle Period shall be taken into account as though the relevant Taxable
period ended on the Closing Date.

     (c) Cooperation on Tax Matters. The Purchaser, the Company and the Sellers shall
cooperate fully, as and to the extent reasonably requested by the other Party, in connection with
the filing of Returns pursuant to this Section 5.14 and any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention and (upon the other Party’s
request) the provision of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually convenient

24

 

basis to provide additional information and explanation of any material provided hereunder.
The Parties agree (i) to retain all books and records with respect to Tax matters pertinent to the
Company relating to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by the Purchaser or the Sellers, any
extensions thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any Taxing authority, and (ii) to give the other party reasonable
written notice prior to transferring, destroying or discarding any such books and records and, if
the other Party so requests, the Company or the Sellers, as the case may be, shall allow the other
Party to take possession of such books and records.

     (d) The Sellers, severally, in proportion to their holdings of Polk Stock on the Closing Date,
and not jointly, agree to indemnify Purchaser and its Affiliates, including, after the Closing, the
Company and each Subsidiary (each herein sometimes referred to as an “Indemnified Taxpayer”)
harmless from and against and shall reimburse each Indemnified Taxpayer for, any and all Taxes or
other expenses (including, without limitation, reasonable expenses of investigation and reasonable
attorneys’ and accountants’ fees and expenses in connection with any action, suit or proceeding)
actually incurred, suffered or accrued at any time by any Indemnified Taxpayer (all herein
referred to as “Tax Losses”) arising out of or attributable to, without duplication:

          (i) any liability for the Taxes of Company and/or any Subsidiary for any period ending on or
before the Closing Date and the Pre-Closing Portion of any Tax period commencing before the Closing
Date and not ending on the Closing Date (the “Straddle Period”), reduced by (A) in the case of any
Tax other than a federal Income Tax, any liability accrual or reserve for that type of Tax as of
the Closing Date (excluding any amount to reflect timing differences between book and Tax income)
set forth on the Financial Statements and (B) any liability for a Tax imposed as a result of a
violation by Purchaser or the Company of the covenant set forth in Section 5.14(h) below;

          (ii) all liabilities of the Company and/or any Subsidiary as a result of the applicability of
Treasury Regulation section 1.1502-6 or otherwise for Taxes of any other corporation affiliated
with the Company on or prior to the Closing Date; and

          (iii) all Tax liabilities of the Company and/or any Subsidiary as a result of the
distribution by the Company of the stock and interests in Polk Mexico and Polk Investments
for any period ending on the Closing Date or the Pre-Closing Period of any Straddle Period.

     Subject to the resolution of any Tax contest pursuant to Section 5.14(e), upon notice
from Purchaser to the Seller Representative that an Indemnified Taxpayer is entitled to an
indemnification payment for a Tax Loss pursuant to this Section 5.14(d), Sellers shall
thereupon pay to the Indemnified Taxpayer the amount of the Tax Loss, provided,
however, that if it is determined upon resolution of the Tax contest by a Government Entity
that Purchaser was not entitled to indemnification hereunder, Purchaser shall repay to Sellers all
amounts Sellers paid to Purchaser for indemnification hereunder.

25

 

     (e) If a claim shall be made by any taxing authority that, if successful, would result in the
indemnification of an Indemnified Taxpayer, the Indemnified Taxpayer shall, within 15 Business
Days, notify the Seller Representative in writing of such fact; provided, however,
that any failure to give such notice will not waive any rights of the Indemnified Taxpayer except
to the extent the rights of the indemnifying party are actually materially prejudiced.

          (i) Sellers shall have the right to defend the Indemnified Taxpayer against such claim with
counsel of their choice reasonably satisfactory to the Indemnified Taxpayer so long as (A) Sellers
notify the Indemnified Taxpayer in writing within 15 Business Days after the Indemnified Taxpayer
has given notice of such claim that Sellers will indemnify the Indemnified Taxpayer as required
hereunder, (B) Sellers provide the Indemnified Taxpayer with evidence reasonably acceptable to the
Indemnified Taxpayer that Sellers will have the financial resources to defend against the claim and
fulfill their indemnification obligations hereunder, (C) if requested by the Indemnified Taxpayer,
Sellers provide to the Indemnified Taxpayer an opinion, in form and substance reasonably
satisfactory to the Indemnified Taxpayer, of counsel reasonably satisfactory to the Indemnified
Taxpayer, that there exists a reasonable basis for the Company to prevail in that contest, (D) if
the Indemnified Taxpayer is requested to pay the Tax claimed and sue for a refund, Sellers shall
have advanced to the Indemnified Taxpayer, on an interest free basis, the full amount the
Indemnified Taxpayer is required to pay, and (E) Sellers conduct the defense of the claim actively
and diligently.

          (ii) Subject to the provisions of paragraph (i) above, Sellers shall be entitled to prosecute
such contest to a determination in a court of initial jurisdiction, and if Sellers shall reasonably
request, to a determination in an appellate court provided that, if requested by the Indemnified
Taxpayer, Sellers shall provide to the Indemnified Taxpayer an opinion, in form and substance
reasonably satisfactory to the Indemnified Taxpayer, of counsel reasonably satisfactory to the
Indemnified Taxpayer, that there exists a reasonable basis for the Company to prevail on that
appeal.

          (iii) Sellers shall not be entitled to settle or to contest any claim relating to Taxes if the
settlement of, or an adverse judgment with respect to, the claim would be likely, in the good faith
judgment of the Indemnified Taxpayer, to cause the liability for any Tax of the Indemnified
Taxpayer or of any Affiliate of the Indemnified Taxpayer for any taxable period ending after the
Closing Date to increase (including, without limitation, by making any election or taking any
action having the effect of making any election, by deferring the inclusion of any amount in income
or by accelerating the deduction of any amount or the claiming of any credit) or to take a position
that, if applied to any taxable period ending after the Closing Date, would be adverse to the
interest of the Indemnified Taxpayer or any Affiliate of the Indemnified Taxpayer.

          (iv) If, after actual receipt by the Indemnified Taxpayer of an amount advanced by Sellers
pursuant to paragraph (i)(D) above, the extent of the liability of the Indemnified Taxpayer with
respect to the indemnified matter shall be established by the judgment or decree of a court that
has become final or a binding settlement with an administrative agency having jurisdiction thereof
that has become final, the Indemnified Taxpayer shall promptly pay to Sellers any refund received
by or credited to the Indemnified Taxpayer with respect to the indemnified matter (together with
any interest paid or credited

26

 

thereon by the taxing authority and any recovery of legal fees from such taxing authority).
Notwithstanding the foregoing, the Indemnified Taxpayer shall not be required to make any payment
hereunder before such time as Sellers shall have made all payments or indemnities then due with
respect to the Indemnified Taxpayer pursuant to this Section 5.14.

          (v) If any of the conditions in Section 5.14(e)(i) above are or become unsatisfied,
(A) the Indemnified Taxpayer may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the claim in any manner it may deem appropriate (and the
Indemnified Taxpayer need not thereafter consult with, or obtain any consent from, any Seller in
connection therewith), (B) Sellers will reimburse the Indemnified Taxpayer promptly and
periodically for the costs of defending against the claim (including, without limitation,
reasonable attorneys’, accountants’ and experts’ fees and disbursements) and (C) Sellers will
remain responsible for any Tax Losses the Indemnified Taxpayer may suffer to the fullest extent
provided in this Section 5.14.

     (f) The indemnification obligations of Sellers under this Section 5.14 shall survive
the Closing until the end of the applicable statutes of limitations. With respect to any
indemnification obligation for any Tax for which a taxing authority asserts a claim within 90 days
before the end of the foregoing survival period, an Indemnified Taxpayer shall be treated as having
provided timely notice to the Seller Representative by providing written notice to the Seller
Representative on or before the 45th day after the Indemnified Taxpayer’s receipt of a written
assertion of the claim by the taxing authority.

     (g) All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees
(including any penalties and interest) incurred in connection with this Agreement shall be paid
one-half by Purchaser and one-half by the Sellers when due, and Purchaser shall cause the Company,
at its own expense, to file all necessary Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and fees. If required by
applicable law, Sellers will join in the execution of any such Returns and other documentation.

     (h) Neither Purchaser, the Company nor any of their respective Affiliates shall make any
election under Section 338 of the Code with respect to the transactions contemplated by this
Agreement.

     (i) To the extent permitted by applicable law, the Parties agree that any indemnification
payments (and/or payments or adjustments) made with respect to this Agreement shall be treated for
all Tax purposes as adjustments to the Purchase Price. Any indemnification obligations of the
Sellers pursuant to this Section 5.14 for Taxes other than federal Income Taxes shall be
satisfied first out of the Indemnity Escrow Fund to the extent thereof.

     (j) Any federal Income Tax refunds that are received by Purchaser, the Company or any
Subsidiary and any amounts credited against federal Income Tax to which Purchaser, the Company or
any Subsidiary become entitled, which relate to taxable periods ending on or before the Closing
Date or to the pre-Closing portion of any Straddle Period, shall, to the extent they exceed the
amounts of anticipated federal Income Tax refunds included as receivables on

27

 

the Financial Statements, be for the account of the Sellers, and Purchaser shall pay over to
the Seller Representative any such excess within ten (10) Business Days after receipt thereof.

Section 5.15 Non-Competition, Non-Solicitation and Non-Disclosure

     (a) General. In consideration of the payment of the Purchase Price, and in order to
induce the Purchaser to enter into this Agreement and to consummate the transactions contemplated
hereby, each of Matthew S. Polk, Jr. (“Polk”), George M. Klopfer (“Klopfer”), James M. Herd, Craig
C. Georgi, Peter D. Gaskarth, and Gary B. Davis (collectively, the “Covenanters”) hereby covenants
and agrees as follows:

          (i) Without the prior written consent of the Purchaser, the Covenanters, and each of them,
shall not for a period of five (5) years from and after the Closing Date (A) directly or
indirectly, except as otherwise permitted hereunder, acquire or own in any manner any interest in
any Person, firm, partnership, corporation, association or other entity which engages or which
Covenanter has reasonable cause to believe will engage in any facet of the Business or which
competes or which Covenanter has reasonable cause to believe will compete in any way with the
Business, anywhere in the world (the “Territory”), (B) be employed by or serve as an employee,
agent, officer, director of, or as a consultant to, any Person, firm, partnership, corporation,
association or other entity which engages or which Covenanter has reasonable cause to believe will
engage in any facet of the Business or which competes or which Covenanter has reasonable cause to
believe will compete in any way with the Business within the Territory, provided, however, that the
foregoing shall not prevent a Covenanter from performing services for a competitive business if
such competitive business is also engaged in other lines of business and (I) if the services of a
Covenanter are restricted to employment in such other lines of business and (II) the net revenues
of the competitive business represent less than 10% of the Company’s net revenues, or (C) utilize
his special knowledge of the Business and/or his relationships with customers, suppliers and others
to compete with the Business of the Company as constituted on the Closing Date; provided,
however, that nothing in this Section 5.15 shall be deemed to prevent (1) a
Covenanter from acquiring through market purchases and owning, solely as an investment, less than
five percent in the aggregate of the equity securities of any class of any issuer whose shares are
registered under §12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and are listed
or admitted for trading on any United States national securities exchange or are quoted on the
National Association of Securities Dealers Automated Quotation System, or any similar system of
automated dissemination of quotations of securities prices in common use, so long as such
Covenanter is not a member of any “control group” (within the meaning of the rules and regulations
of the United States Securities and Exchange Commission) of any such issuer, (2) the purchase of an
interest in a competing business, public or private, if the interest is acquired passively and
indirectly by an entity in which Covenanter has less than a 3% interest (for example, in a private
equity or mutual fund investment) as long as Covenanter has no involvement in the management of
such investment and plays a passive role with respect to such investment, (3) the continued
ownership of an interest in a competing business that was acquired prior to that firm engaging in
or giving Covenanter reasonable cause to believe that they would engage in competition with the
Purchaser. Each Covenanter acknowledges and agrees that the covenants provided for in this
Section 5.15(a) are reasonable and necessary in terms of time, area and line of business to
protect the Company’s Intellectual Property. Each Covenanter further

28

 

acknowledges and agrees that such covenants are reasonable and necessary in terms of time,
area and line of business to protect the Company’s legitimate business interests, which include its
interests in protecting the Company’s (i) valuable confidential business information, (ii)
substantial relationships with customers throughout the world, and (iii) customer goodwill
associated with the ongoing business of the Company. Each Covenanter expressly authorizes the
enforcement of the covenants provided for in this Section 5.15(a) by (A) the Purchaser and
its Subsidiaries, (B) the Purchaser’s permitted assigns, and (C) any successors to the Company’s or
the Purchaser’s business. To the extent that the covenants provided for in this Section
5.15(a) may later be deemed by a court to be too broad to be enforced with respect to its
duration or with respect to any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration or scope of the provision, and to add or
delete specific words or phrases to or from the provision. The provision as modified shall then be
enforced.

          (ii) Without the prior consent of the Purchaser, such Covenanter shall not for a period of
five (5) years from the Closing Date, directly or indirectly, for himself or for any other Person,
firm, corporation, partnership, association or other entity, (A) attempt to employ or enter into
any contractual arrangement with any employee or former employee of the Company or any Subsidiary,
unless such employee or former employee has not been employed by the Company or any Subsidiary for
a period in excess of nine months, provided, however, that general, non-targeted
public advertisements and solicitations shall not be prohibited by this clause, and/or (B) call on
or solicit any of the actual or targeted prospective customers or clients of the Company or any
Subsidiary for purposes of soliciting such customers or clients to purchase products which compete
with those of the Company or Purchaser, nor shall such Covenanter make known the names and
addresses of such customers or any information relating in any manner to the Company’s or any
Subsidiary’s trade or business relationships with such customers.

          (iii) Such Covenanter shall not at any time within a period of five (5) years from the later
of the Closing Date or five (5) years from the termination of his affiliation with the Company as
an employee or consultant divulge, communicate, use to the detriment of the Company or for the
benefit of any other Person or Persons, or misuse in any way, any confidential information
pertaining to the Company or any Subsidiary. Any confidential information or data now known or
hereafter acquired by such Covenanter with respect to the Company or any Subsidiary shall be deemed
a valuable, special and unique asset of the Company that is received by such Covenanter in
confidence. For the purposes of the foregoing, confidential information shall not include
information that generally becomes available to the public, other than as a result of disclosure by
a Covenanter in violation of this Section 5.15.

     (b) Injunction. It is recognized and hereby acknowledged by the parties hereto that a
breach or violation by a Covenanter of any or all of the covenants and agreements contained in this
Section 5.15 may cause irreparable harm and damage to the Purchaser in a monetary amount
which may be virtually impossible to ascertain. As a result, each Covenanter recognizes and hereby
acknowledges that the Purchaser shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any breach or violation of any or all of the covenants and
agreements contained in this Section 5.15 by such Covenanter and/or his agents, either
directly or indirectly, and that such right to injunction shall be cumulative and

29

 

in addition to whatever other rights or remedies the Purchaser may possess hereunder, at law
or in equity. Nothing contained in this Section 5.15 shall be construed to prevent
Purchaser from seeking and recovering from a Covenanter damages sustained by Purchaser as a result
of any breach or violation by such Covenanter of any of the covenants or agreements contained
herein.

     (c) Disclosure Required by Law. If Covenanter receives a request to disclose all or
any part of the confidential information under the terms of a subpoena or order issued by a
Government Entity, Covenanter agrees timely to notify Purchaser of the existence, terms, and
circumstances surrounding such request, to consult with Purchaser on the advisability of taking
legally available steps to resist or narrow such request; and, if disclosure of such confidential
information is required to prevent Covenanter from being held in contempt or subject to other
penalty, to furnish only such portion of the confidential information as, in the written opinion of
Covenanter’s counsel, Covenanter is legally compelled to disclose, and to exercise Covenanter’s
reasonable efforts to obtain an order or other reliable assurance that confidential treatment will
be accorded to the disclosed confidential information. Purchaser shall promptly reimburse
Covenanter for all reasonable, out-of-pocket expenses incurred in complying with the terms of this
subsection.

Section 5.16 Public Announcements

     None of the Company and the Sellers, on the one hand, or the Purchaser, on the other hand,
shall make, or permit any agent or Affiliate to make any public statements, including, without
limitation, any press releases, with respect to this Agreement and the transactions contemplated
hereby without the prior written consent of the other, except as may be required by law. The
Purchaser, on the one hand, and the Sellers and the Company, on the other hand, shall jointly agree
on the timing, content and substance of all public announcements concerning the transactions
contemplated hereby.

Section 5.17 Litigation Support

     In the event and for so long as any Party actively is contesting or defending against any
third party action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
in connection with (a) any transaction contemplated under this Agreement, or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving the Sellers, the
Company or the Purchaser, the Parties agree to (i) cooperate with the contesting or defending Party
and its counsel, (ii) make available its employees to provide testimony, to be deposed, to act as
witnesses and to assist counsel, and (iii) provide access to its books and records as shall be
necessary in connection with the defense or contest, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article VI below).

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Section 5.18 Transaction Expenses

     Each of the Purchaser, on the one hand, and the Sellers and the Company, on the other hand,
shall bear their own costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby; provided, however,
that the Company shall pay and discharge all of its costs and expenses prior to Closing.

     Section 5.19 Post-Closing Company Executive Compensation and Short- and Long-Term Incentive
Compensation Arrangements

     From and after the Closing, certain Polk management employees as determined by James M. Herd
and approved by Purchaser’s President (such approval not to be unreasonably withheld, delayed or
conditioned) shall be entitled to participate in the executive compensation and short- and
long-term incentive arrangements described in the attached Exhibit G.

Section 5.20 Replacement LCs

     At or prior to Closing, Purchaser shall provide substitute LC’s or alternative security
reasonably acceptable to the Sellers for LCs outstanding on the Closing Date.

Section 5.21 Post-Closing Lease Amendment

     The Sellers Klopfer, Polk and Craig C. Georgi, who are the general partners of Klopfer
Associates Limited Partnership (“KALP”), the landlord entity as to the Company’s Baltimore
facility, and who are also the managing members of Klopfer Associates LLC (“KALLC”), the landlord
entity as to the Company’s San Diego facility, hereby agree to use their commercially reasonable
efforts, after the Closing, to induce or persuade GE Commercial Credit (“GE”), the lender and
secured party with respect to existing commercial mortgages on both facilities (the “GE Mortgages”)
to consent to certain assignments, amendments and modifications to the currently effective leases
on these two facilities (the “Leases”) providing for the changes in the terms and conditions
thereof which are set forth on the attached Exhibit H and, subject to such approval by GE,
cause KALP and KALLC to execute and deliver to the Company restated leases that reflect the
Exhibit H modifications approved by GE. Under the terms of the GE Mortgages, no amendments
to or assignments of the Leases are valid or binding unless first approved by GE, and GE may grant
or withhold its consent to lease amendments or assignments in its sole discretion. The term
“commercially reasonable efforts” as used in this context shall not be construed to include (a)
voluntary prepayment in whole or in part, (b) the pledging of additional collateral, or (iii) the
addition of personal guarantees or other credit enhancements with respect to the GE Mortgages.

Section 5.22 Employment Agreements with Polk and Klopfer

     Polk and Klopfer shall enter into employment agreements with the Purchaser after Closing on
terms mutually acceptable to Purchaser and each of Polk and Klopfer, providing for annual base
compensation for Klopfer in the amount of $83,000 and for Polk in the amount of $83,000 and
providing for continuation of medical insurance and other benefits as set forth in

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Section 5.13, and reimbursement of reasonable out-of-pocket and travel expenses, and as
otherwise agreed between Polk and Klopfer, on the one hand, and Purchaser.

ARTICLE VI.

SURVIVAL AND INDEMNIFICATION

Section 6.1 Survival of Representations and Warranties

     All of the representations and warranties contained in Articles II, III and
IV above shall survive the Closing hereunder for a period of twelve (12) months;
provided that the representations and warranties set forth in Sections 2.1
(Organization, Corporate Power and Authorization), 3.1 (Authorization), 3.3
(Capital Stock), 4.1 (Organization; Qualification and Corporate Power), 4.3
(Capitalization; Subsidiaries) and 4.10 (Tax Matters) above shall survive the Closing
hereunder for a period of the applicable statute of limitations.

Section 6.2 Indemnification Obligations of the Sellers

     Subject to the provisions of Section 6.4 below, the Sellers shall, severally, in
proportion to their holdings of Polk Stock on the Closing Date, and not jointly, indemnify and hold
harmless the Purchaser and its Affiliates, stockholders, officers, directors, employees and agents
(collectively, the “Purchaser Indemnitees”) in respect of any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of or by virtue of, without duplication:

     (a) the breach by the Sellers (or the Company with respect to the period prior to the Closing
Date) of any of the covenants made by the Sellers (or the Company with respect to the period prior
to the Closing Date) in this Agreement;

     (b) the breach of any of the representations and warranties made by the Sellers or the Company
in this Agreement (it being agreed that, for purposes of this Section 6.2(b), all
qualifications and exceptions contained in the representations and warranties set forth in
Articles III and IV relating to materiality, Material Adverse Change, Material
Adverse Effect, or words of similar import shall be disregarded), provided,
however, that the Sellers are given an Indemnification Claim Notice during the applicable
survival period specified in Section 6.1 above;

     (c) the Delphi claim (hereafter defined); and

     (d) the lease described in item 3(a) on Schedule 4.13(b) of the Disclosure Schedule,
provided, however, that Sellers promptly shall pay to Purchaser the entire amount
of such Loss directly, and not from the Indemnity Escrow Fund (the “Lease Loss”).

     Notwithstanding the foregoing, the Purchaser shall not be entitled to indemnification with respect
to a breach of any of the representations and warranties set forth in this Agreement if and to the
extent that Troy D. Templeton, James E. Minarik, Jon E. Elias or Kevin P. Duffy had actual
knowledge prior to the date hereof of the events or conditions constituting or resulting in

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such breach of representation or warranty and could reasonably have appreciated the amount of
Losses resulting from such events or conditions.

Section 6.3 Indemnification Obligations of the Purchaser

     Subject to the provisions of Section 6.4 below, the Purchaser shall indemnify and hold
harmless the Sellers and their respective Affiliates, stockholders, officers, managers, directors,
employees and agents (collectively, the “Sellers Indemnitees”) in respect of any Loss which any
Sellers Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of, without
duplication:

     (a) the breach by the Purchaser (or the Company with respect to the period following to the
Closing Date) of any of the covenants made by it (or the Company with respect to the period
following the Closing Date) in this Agreement, and

     (b) the breach of any of the representations and warranties of the Purchaser contained in this
Agreement (it being agreed that, for purposes of this Section 6.3(b), all qualifications
and exceptions contained in the representations and warranties set forth in Article II
relating to materiality, Material Adverse Change, Material Adverse Effect, or words of similar
import shall be disregarded), provided, that the Purchaser is given an Indemnification
Claim Notice during the applicable survival period specified in Section 6.1 above.

Section 6.4 Limitations on Indemnification

     (a) No party shall be entitled to assert any claim for indemnification pursuant to
Sections 6.2(b) or 6.3(b) above unless and until the amount of the Losses sustained
by such party with respect to any individual matter exceeds $20,000. In addition, no party shall
be obligated to indemnify another party with respect to any Losses pursuant to Section
6.2(b) or Section 6.3(b) as to which a party is otherwise entitled to assert any claim
for indemnification unless and until the aggregate amount of the Losses attributable to the
Purchaser Indemnitees or the Sellers Indemnitees, as the case may be, exceeds $1,360,000.00 (the
“Basket Amount”); and then only to the excess of, but not including, the Basket Amount.
Notwithstanding anything in this Agreement to the contrary, the maximum aggregate obligation of the
Sellers pursuant to Section 6.2(b) shall not exceed $6,800,000.00; provided,
however, that neither the limitations provided by the first two sentences of this
Section 6.4(a) nor such maximum obligation shall apply to Losses caused by breaches of the
representations and warranties set forth in Sections 2.1 (Organization; Corporate Power and
Authorization), 3.1 (Authorization), 3.3 (Capital Stock), 4.1
(Organization; Qualification and Corporate Power), 4.3 (Capitalization; Subsidiaries) and
4.10 (Tax Matters) above, and provided, further, that the limitations
provided by the first and second sentences of this Section 6.4(a) shall not apply to any
Loss suffered by the Purchaser Indemnitees resulting from a possible preference claim (the “Delphi
Claim”) by Delco Electronics Corporation or its Affiliates or trustee representing any of them
against the Company or its Subsidiaries in connection with payments made under the Settlement and
Release Agreement dated July 1, 2005 between the Company and Delphi Electronics Corporation or from
the Lease Loss.

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     (b) In calculating the amount of Losses suffered or incurred by a party for which
indemnification is sought hereunder there shall be deducted the amount of any insurance paid to
such party or otherwise actually inuring to the benefit of such party as a result of any such Loss,
it being agreed that each Party shall use reasonable commercial efforts to mitigate such Loss and
to use reasonable commercial efforts to pursue insurance claims in connection therewith.

     (c) The foregoing indemnification provisions shall be the sole and exclusive remedy and
procedure for all claims for breach of any representation or warranty contained in this Agreement,
except in the case of fraud or intentional misrepresentation.

Section 6.5 Indemnification Procedures

     (a) Notice of Claim. Any Person making a claim for indemnification pursuant to
Sections 6.2 or 6.3 above (an “Indemnified Party”) must give the Party from whom
indemnification is sought (an “Indemnifying Party”) written notice of such claim, containing a
description of the claim and the nature and amount of such Loss (to the extent that the nature and
amount of such Loss is known at such time) (an “Indemnification Claim Notice”), promptly after the
Indemnified Party receives any written notice of any action, lawsuit, proceeding, investigation or
other claim against or involving the Indemnified Party by a Government Entity or other third Person
or otherwise discovers the liability, obligation or facts giving rise to such claim for
indemnification (it being understood that any claim for indemnity pursuant to Sections
6.2(b) or 6.3(b) above must be made by notice given within the applicable survival
period specified in Section 6.1 above). The failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of its or his obligations to provide indemnification
hereunder except to the extent such failure shall have harmed the Indemnifying Party.

     (b) Control of Defense; Conditions. The obligations of an Indemnifying Party under
this Article VI with respect to Losses arising from claims of any third party that are
subject to the indemnification provided in Sections 6.2 or 6.3 above shall be
governed by and contingent upon the following additional terms and conditions:

          (i) At its option an Indemnifying Party shall be entitled to assume control of the defense of
any claim and may appoint as lead counsel of such defense any legal counsel selected by the
Indemnifying Party and reasonably satisfactory to the Indemnified Party. The Indemnifying Party
shall, within thirty (30) days after delivery of the Indemnification Claim Notice to Indemnifying
Party, notify the Indemnified Party of its intention as to the conduct and control of the defense
of such claim. Until the Indemnified Party has received notice of the Indemnifying Party’s
election whether to defend any claim, the Indemnified Party may take reasonable steps to defend
(but may not settle) such claim. If the Indemnifying Party shall decline to assume the defense of
any such claim, or the Indemnifying Party shall fail to notify the Indemnified Party within thirty
(30) days after delivery of the Indemnification Claim Notice of the Indemnifying Party’s election
to defend such claim, the Indemnified Party shall defend against such claim. Regardless of which
Party shall assume the defense of the claim, the Parties agree to cooperate fully with one another
in connection therewith and to keep each other reasonably informed of the status of the claim and
any related proceeding and shall take no

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action or make any admissions or statements not required by applicable law which would
adversely effect the defense of any such claim.

          (ii) Notwithstanding Section 6.5(b)(i) above, the Indemnified Party shall be entitled
to participate in the defense of such claim and to employ counsel of its choice for such purpose;
provided, however, that such employment shall be at the Indemnified Party’s own
expense unless (A) the employment thereof has been specifically authorized by the Indemnifying
Party in writing, or (B) the Indemnifying Party has failed to assume the defense and employ counsel
(following delivery of the Indemnification Claim Notice), in which case the fees and expenses of
the Indemnified Party’s counsel shall be paid by the Indemnifying Party.

          (iii) The Indemnified Party shall not consent to the entry of any judgment or enter into any
settlement with respect to any third party claim without the prior written consent of the
Indemnifying Party (not to be withheld, conditioned or delayed unreasonably), and the Indemnifying
Party shall not consent to the entry of any judgment or enter into any settlement with respect to
any third party claim without the prior written consent of the Indemnified Party (such consent not
to be withheld, conditioned or delayed unreasonably).

     (c) Manner of Payment.

          (i) Any indemnification obligations of the Sellers pursuant to Section 6.2 above shall
be satisfied first out of the Indemnity Escrow Fund pursuant to the Escrow Agreement to the extent
thereof.

          (ii) Any indemnification obligations of the Purchaser pursuant to Section 6.3 above
shall be paid by wire transfer of immediately available funds to an account designated in writing
by the Seller Representative on behalf of the applicable Seller Indemnitees within fifteen (15)
days after the determination thereof.

     (d) Escrow Agreement and Holdback Amount

     At Closing, the Purchaser shall deliver an amount equal to $6,800,000.00 (the “Indemnity
Escrow Fund”) to JPMorgan Chase Bank, N.A., as escrow agent (the “Escrow Agent”), as security for
any amounts owed to the Purchaser pursuant to the indemnification provisions set forth in
Section 6.2 above. The Indemnity Escrow Fund shall be held by the Escrow Agent for 12
months pursuant to the terms and conditions of this Article VI and the Indemnity Escrow Agreement
attached as Exhibit A hereto.

     (e) Instructions to Escrow Agent. In the event of a determination that a payment is
due to any Purchaser Indemnitee, the Purchaser and the Seller Representative shall issue joint
written instructions to the Escrow Agent to distribute a portion of the Indemnity Escrow Fund equal
to such payment.

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ARTICLE VII.

CONDITIONS TO THE CLOSING

Section 7.1 Conditions of the Purchaser’s Obligation

     The Purchaser’s obligation to effect the Purchase at the Closing is subject to the
satisfaction as of the Closing of the following conditions precedent:

     (a) Representations and Warranties; Covenants. The representations and warranties set
forth in Articles III and IV above shall be true and correct in all material
respects at and as of the Closing (except for those representations and warranties that speak
specifically to an earlier date, which shall be true and correct in all material respects as at
that date) as though then made and the Sellers and the Company shall have performed and observed in
all material respects each covenant or other obligation required to be performed or observed by it
pursuant to the Transaction Documents prior to the Closing.

     (b) Proceedings. No action, suit or proceeding shall be pending or threatened before
any judicial authority or Government Entity the result of which could prevent or prohibit the
consummation of any transaction pursuant to the Transaction Documents or cause any such transaction
to be rescinded following such consummation or which seeks damages against the Company as a result
of the consummation of this Agreement in excess of $100,000, and no judgment, order, decree,
stipulation, injunction or charge having any such effect shall exist Notwithstanding anything set
forth in this Section 7.1(b) or in this Agreement to the contrary, any action suit or proceeding
pending or threatened by the lenders pursuant to Purchaser’s existing credit facilities and any
judgment, order, decree, stipulation, injunction or charge resulting from any such action, suit or
proceeding which has any of the foregoing affects, or is intended to have any of the foregoing
affects, upon the transactions contemplated by the Transaction Documents, shall be disregarded and
of no consequence or effect upon any condition to the Purchaser’s obligations to close the
transactions contemplated by the Transaction Documents.

     (c) Opinion of Counsel. The Purchaser shall have received from DLA Piper Rudnick Gray
Cary US LLP, special counsel for the Sellers, an opinion addressed to the Purchaser and dated as of
the Closing Date, substantially in the form of Exhibit C attached hereto.

     (d) Absence of Changes. Since the date hereof, no Material Adverse Change has
occurred that has not been cured.

     (e) Closing Documents. The Company shall have delivered to the Purchaser the
following documents:

          (i) a certificate of the Company, dated as of the Closing Date and signed by an executive
officer of the Company, expressly certifying that the condition set forth in Section 7.1(a)
above has been met;

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          (ii) a certificate of the Chief Executive Officer and the Chief Financial Officer of the
Company setting forth the Funded Debt Amount and the amount payable pursuant to Section 1.4(c)
hereof, if any, and in each case, providing reasonable detail regarding the calculation thereof.

          (iii) a copy of the resolutions duly adopted by the board of directors and the stockholders of
the Company authorizing the execution, delivery and performance by the Company of each Transaction
Document to which the Company is a party and the consummation of the Purchase and all other
transactions contemplated by the Transaction Documents, as in effect as of the Closing, certified
by the Secretary of the Company; and

          (iv) certificates (each dated not more than 10 Business Days prior to the Closing), as to the
good standing of each of the Company and its Subsidiaries in its jurisdiction of incorporation or
formation, as applicable.

     (f) Payoff Letters. The Seller Representative, on behalf of the Sellers, shall have
delivered to the Purchaser a payoff letter from each lender of a Funded Debt Amount and a release
of any and all Liens against the Company’s assets and/or properties resulting therefrom shall have
been obtained, all in form reasonably acceptable to Purchaser.

     (g) HSR Act. All filings required under the HSR Act shall have been made and the
applicable waiting period shall have expired or been earlier terminated (the “HSR Condition”).

     (h) Intentionally Left Blank.

     (i) No Bankruptcy. No proceeding in which the Company shall be a debtor, defendant or
party seeking an order for its own relief or reorganization shall have been brought or be pending
by or against such Person under any United States or state bankruptcy or insolvency law.

     (j) Name and Likeness Agreement. Polk shall have executed a Name and Likeness
Agreement in the form attached hereto as Exhibit F.

     (k) Termination of Options. The Options shall have been exercised, terminated and/or
cancelled in all respects.

     (l) Material Contract Consents. Purchaser shall have received written evidence,
reasonably satisfactory to it, of the consent to the transactions contemplated by this Agreement of
all Persons where the absence of such consent would result in a breach or default under any
Material Contract, including, without limitation, the consent of KALLC with respect to the
Company’s San Diego lease.

     (m) Accountant Consent. The Purchaser shall have received the consent of the
Company’s independent public accountants required to be included in Purchaser’s Current Report on
Form 8-K relating to the Purchase.

     Any condition set forth in this Section 7.1 may be waived by the Purchaser.

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Section 7.2 Conditions of the Sellers’ Obligation

     The Sellers’ obligation to effect the Purchase at the Closing is subject to the satisfaction
as of the Closing of the following conditions precedent:

     (a) Representations and Warranties; Covenants. The representations and warranties set
forth in Article II above shall be true and correct in all material respects at and as of
the Closing (except for those representations and warranties that speak specifically to an earlier
date, which shall be true and correct in all material respects as at that date) as though then
made, and the Purchaser shall have performed and observed in all material respects each covenant or
other obligation required to be performed or observed by it pursuant to the Transaction Documents
prior to the Closing.

     (b) Proceedings. No action, suit or proceeding shall be pending or threatened by any
Government Entity the result of which could prevent or prohibit the consummation of any transaction
pursuant to the Transaction Documents, or cause any such transaction to be rescinded following such
consummation and no judgment, order, decree, stipulation, injunction or charge having any such
effect shall exist.

     (c) Opinion of Counsel. The Sellers shall have received from Greenberg Traurig, LLP,
special counsel for the Purchaser, an opinion addressed to the Sellers and dated as of the Closing
Date, substantially in the form of Exhibit D attached hereto.

     (d) Purchaser Closing Documents. The Purchaser shall have delivered to the Seller
Representative the following documents:

          (i) a certificate of the Purchaser, dated as of the Closing Date and signed by an executive
officer of the Purchaser, expressly certifying that the condition set forth in Section
7.2(a) above has been met;

          (ii) a copy of the resolutions duly adopted by the board of directors of the Purchaser and, if
required, by its stockholders, authorizing the Purchaser’s execution, delivery and performance of
each Transaction Document to which the Purchaser is a party and the consummation of the Purchase
and all other transactions contemplated by the Transaction Documents, as in effect as of the
Closing, certified by an officer of the Purchaser; and

          (iii) a certificate (dated not more than 10 Business Days prior to the Closing) as to the good
standing of the Purchaser in its jurisdiction of incorporation.

     (e) HSR Act. The HSR Condition shall have been satisfied.

     (f) No New Company Matters Exceeding Certain Indemnification Limits. The Sellers shall
become aware of the existence of facts or circumstances, which they shall promptly communicate in
writing to Purchaser, occurring between the date hereof and the Closing Date (the “New Facts”) for
which Seller Indemnitees would reasonably be likely to be

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liable to pay Purchaser Indemnitees an amount of Loss in connection with the New Facts $1
million or more in excess of the Basket Amount; provided, however, that the Sellers
hereby agree to waive this Closing condition if Purchaser provides written notice to the Seller
Representative prior to the Closing or earlier termination of this Agreement that notwithstanding
the foregoing, the Seller Indemnitees shall only be responsible for payment to Purchaser
Indemnitees of an amount of Loss in connection with the New Facts of not more than $1 million in
excess of the Basket Amount.

     (g) Purchaser shall have issued and sold to Polk, Klopfer, James M. Herd, Gary B. Davis,
Michael Scharff, Jeffrey Nemec, Keith A. Ballard, Stuart Lumsden, and Daniel Hodgson (collectively,
the “Investor Sellers”), for a per share price $12.40 and pursuant to Purchaser’s subscription
agreements in form and substance reasonably acceptable to Purchaser and the Investor Sellers, an
aggregate of 80,645, 44,355, 80,645, 40,323, 4,032, 12,097, 8,065, 4,032, and 8,065 shares of
Purchaser’s common stock, respectively.

     Any condition set forth in this Section 7.2 may be waived by the Seller Representative on
behalf of the Sellers.

ARTICLE VIII.

DEFINITIONS

     Definitions

     For the purposes of this Agreement, the following terms have the meanings set forth below:

     An “Affiliate” of any Person means any other Person directly or indirectly controlling,
controlled by or under common control with such first Person within the meaning of the Securities
Exchange Act of 1934, as amended, including any officer, director, or greater than 5% stockholder
of such Person.

     “Affiliated Group” means any affiliated group within the meaning of Section 1504(a) of the
Code or any similar group defined under a similar provision of state, local or foreign law.

     “Agreement” has the meaning specified in the Preamble.

     “Basket Amount” has the meaning specified in Section 6.4(a).

     “Business” means the business of the Company and its Subsidiaries, as conducted on the date of
this Agreement.

     “Business Day” means any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the State of Maryland or is a day on which banking institutions located in such
state are authorized or required by law or other governmental action to close.

     “Cash” means cash and cash equivalents (including, without limitation, marketable securities
and short-term investments) calculated in accordance with GAAP.

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     “Closing” and “Closing Date” have the respective meanings set forth in Section 1.3.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Common Stock” means the common stock of the Company, par value $.01 per share.

     “Company” has the meaning specified in the Preamble.

     “Company’s Knowledge” means to the actual knowledge of Klopfer, Polk, James M. Herd, or Gary
B. Davis, or such knowledge as would have been obtained after investigation consistent with the
performance of such officer’s duties in the ordinary course of business.

     “Confidentiality Agreement” means the Confidentiality Agreement regarding the confidentiality
obligations of the Purchaser, executed by the Purchaser as of March 18, 2006, a copy of which is
attached hereto as Exhibit E.

     “Covenanters” has the meaning specified in Section 5.15(a).

     “Delphi Claim” has the meaning specified in Section 6.4(a).

     “Disclosure Schedule” has the meaning specified in Article IV.

     “EGTRRA” means The Economic Growth and Tax Relief Reconciliation Act of 2001.

     “Employee Benefit Plan” means any (a) nonqualified deferred compensation or retirement plan or
arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any
multiemployer plan), or (d) Employee Welfare Benefit Plan or material fringe benefit plan or
program.

     “Employee Pension Benefit Plan” has the meaning specified in Section 3(2) of ERISA.

     “Employee Welfare Benefit Plan” has the meaning specified in Section 3(1) of ERISA.

     “Environmental Laws” means all federal, state, and local statutes, regulations and ordinances
concerning the pollution or protection of the environment, including without limitation the Clean
Air Act, the Clean Water Act, the Solid Waste Disposal Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Federal
Insecticide, Fungicide and Rodenticide Act, the Occupational Safety and Health Act, and the
Emergency Planning and Community Right-to-Know Act of 1986.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

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     “Escrow Agent” has the meaning specified in Section 6.5(d).

     “Financial Statements” has the meaning specified in Section 4.4.

     “Financing Agreement” has the meaning specified in Section 2.4.

     “Funded Debt Amount” shall mean, without duplication, an amount equal to the sum of (a) the
aggregate amount of all principal, interest, fees, expenses and other amounts in respect of money
borrowed by the Company from Merrill Lynch Capital Corporate Finance (a unit of Merrill Lynch
Business Financial Services Inc.)(“ML”), (b) any other obligations of the Company for borrowed
money, capital lease obligations, dividends payable to any Seller (excluding any pre-Closing
payment to Sellers pursuant to the provisions of Section 1.4(c)), bonus payables to Sellers
or any Affiliate of the Company, and purchase money indebtedness, (c) indebtedness of the type
described in clauses (a) or (b) above guaranteed, directly or indirectly, in any manner by the
Company, or in effect guaranteed, directly or indirectly, in any manner by the Company, through an
agreement, contingent or otherwise, to supply funds to, or in any other manner invest in, the
debtor, or to purchase indebtedness, or to purchase and pay for property if not delivered or to pay
for services if not performed, primarily for the purpose of enabling the debtor to make payment of
the indebtedness or to assure the owners of the indebtedness against loss, but excluding
endorsements of checks and other instruments in the ordinary course, (d) Sellers’ Expense Amount,
and (e) interest expense accrued and unpaid, and all prepayment premiums on or relating to any of
such indebtedness, provided, however, the term “Funded Debt Amount” shall not
include any principal, interest, fees, expenses and other amounts which the Company becomes or may
become obligated to pay subsequent to Closing pursuant to the LC’s.

     “GAAP” means United States generally accepted accounting principles applied on a basis
consistent with the preparation of the audited Financial Statements for the fiscal year ended March
26, 2006, except as the context otherwise dictates with respect to representations and warranties
under Section 4.4 relating to Financial Statements for earlier periods, which shall be
applied on a basis consistent with the preparation of the Financial Statements immediately
preceding such earlier period.

     “GE” has the meaning specified in Section 5.21.

     “GE Mortgages” has the meaning specified in Section 5.21.

     “Government Entity” means the United States of America or any state or other political
subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or
administrative functions of government.

     “GUST” means the Uruguay Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief
Act of 1997, the Internal Revenue Service Restructuring and Reform Act of 1998, and the Community
Renewal Tax Relief Act of 2000.

41

 

     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations promulgated thereunder.

     “HSR Condition” has the meaning specified in Section 7.1(g).

     “Income Tax” means any federal, state, local, or foreign income Tax, including any interest,
penalty or addition thereto.

     “Income Tax Return” means any return, declaration, report, or information statement or
statement relating to Income Taxes, including any schedule or attachment thereto.

     “Indemnification Claim Notice” has the meaning specified in Section 6.5(a).

     “Indemnified Party” has the meaning specified in Section 6.5(a).

     “Indemnified Taxpayer” has the meaning specified in Section 5.14(d).

     “Indemnifying Party” has the meaning specified in Section 6.5(a).

     “Indemnity Escrow Fund” has the meaning specified in Section 6.5(d).

     “Intellectual Property” means all patents and patent applications; registered and material
unregistered copyrights; registrations for, pending applications for and material unregistered
trademarks, service marks, trade names or domain names, computer software; all trade secrets,
know-how, manufacturing and production processes, recipes, drawings, and designs.

     “Investor Sellers” has the meaning specified in Section 7.2(g).

     “IRS” means the U.S. Internal Revenue Service.

     “KALLC” has the meaning specified in Section 5.21.

     “KALP” has the meaning specified in Section 5.21.

     “Klopfer” has the meaning specified in Section 5.15(a).

     “Latest Balance Sheet” means the Company’s June 25, 2006 unaudited balance sheet prepared by
management.

     “LCs” means those two irrevocable letters of credit provided by Banca Monte Dei Paschi Di
Siena S.p.A. and ML (as arranger), each in the approximate amount of $1.05 million, in favor of Ya
Hsin Industrial Co., Ltd., dated June 23, 2006, as amended, for payment of shipments of units of
the Company’s I-Sonic Entertainment System.

     “Lease Loss” has the meaning specified in Section 6.2(d).

42

 

     “Leased Premises” has the meaning specified in Section 4.13(b).

     “Leases” has the meaning specified in Section 5.21.

     “Legal Requirement” means any requirement arising under any action, law, treaty, rule or
regulation, determination or direction of an arbitrator or Government Entity, including any
Environmental Law.

     “Liabilities” means any and all debts, liabilities and obligations of any nature whatsoever,
whether accrued or fixed, absolute or contingent, mature or unmatured or determined or
indeterminable.

     “Long-Term Incentive Plan” means the $2.17 million supplemental key management cash bonus plan
of the Company.

     “Loss” means, with respect to any Person, any liability, cost, damage, deficiency, penalty,
fine or other loss or expense, whether or not arising out of a third party claim, against or
affecting such Person.

     “Majority Interest” has the meaning specified in Section 9.18(a).

     “Material Adverse Change” means an event, condition or circumstance or related series thereof
that results in a material adverse effect on the Business, results of operations or condition of
the Company and its Subsidiaries, taken as a whole, exclusive of any effect arising from or related
to (a) any general condition affecting the industry in which the Business is engaged, (b) the
announcement or pendency of any of the transactions contemplated by the Agreement, (c) any action
taken by Sellers or the Company at the Purchaser’s request or pursuant to the Transaction
Documents, (d) acts of war or terrorism, (e) general economic, political and financial market
changes, and (f) any matters specifically disclosed in the schedules attached to this Agreement.

     “Material Adverse Effect” means a material adverse effect on the Business, properties, assets,
liabilities, results of operations or condition of the Company and its Subsidiaries, taken as a
whole.

     “Material Contracts” has the meaning specified in Section 4.19(b).

     “ML” has the meaning specified in the definition of “Funded Debt Amount”.

     “New Facts” has the meaning specified in Section 7.2(f).

     “Options” has the meaning specified in Section 4.3(a).

     “Parties” has the meaning set forth in the Preamble.

43

 

     “Person” means an individual, a partnership, a corporation, an association, a limited
liability company, a joint stock company, a trust, a joint venture, an unincorporated organization
or a Government Entity.

     “Polk” has the meaning specified in Section 5.15(a).

     “Polk Investments” means Polk Investments LLC”

     “Polk Mexico” means Polk Audio de Mexico S. de R.L.

     “Polk Stock” has the meaning set forth in the Recitals.

     “Preamble” means the Preamble to this Agreement.

     “Pre-Closing Portion” has the meaning specified in Section 5.14(b).

     “Purchase” has the meaning set forth in the Recitals.

     “Purchase Price” has the meaning specified in Section 1.2(a).

     “Purchaser” has the meaning set forth in the Preamble.

     “Purchaser Disclosure Schedule” has the meaning specified in Article II.

     “Purchaser Indemnitees” has the meaning specified in Section 6.2.

     “Purchaser Material Adverse Effect” means a material adverse effect on the business,
properties, liabilities, results of operations or condition of the Purchaser.

     “Purchaser Common Stock” has the meaning specified in Section 1.4(d).

     “Recitals” means the Recitals to this Agreement.

     “Returns” shall mean all reports, estimates, declarations of estimated Tax, information
statements and returns relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup withholding and other payments to
third parties.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Seller” and “Sellers” has the meaning set forth in the Preamble.

     “Seller Representative” has the meaning specified in the Preamble.

     “Sellers’ Expense Amount” means the aggregate amount payable by Sellers and the Company as of
the Closing Date, but not paid on or prior to the Closing, in respect of legal,

44

 

accounting, investment banking and other similar fees, costs and expenses arising as a result
of the transactions contemplated by this Agreement.

     “Sellers Indemnitees” has the meaning specified in Section 6.3.

     “Stockholders’ Agreement” has the meaning specified in Section 3.3.

     “Straddle Period” has the meaning specified in Section 5.14(d)(i).

     “Subsidiary” means, with respect to any Person, any corporation, limited liability company,
partnership, association or other business entity of which (a) if a corporation or a limited
liability company (with voting securities), a majority of the total voting power of shares of stock
or interests 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 that Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (b) if a limited liability company (without voting securities), partnership,
association or other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one
or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a limited liability company,
partnership, association or other business entity if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association or other business entity gains or
losses or shall be or control any managing director or general partner of such limited liability
company, partnership, association or other business entity.

     “Tax” or “Taxes” shall mean all taxes, however denominated, including any interest, penalties
or other additions to tax that may become payable in respect thereof, imposed by any federal,
territorial, state, local or foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the foregoing, all income
or profits taxes (including, but not limited to, federal income taxes and state income taxes),
payroll and employee withholding taxes, unemployment insurance, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes,
transfer taxes and other obligations of the same or of a similar nature to any of the foregoing,
which the Company is required to pay, withhold or collect.

     “Tax Losses” has the meaning specified in Section 5.14(d).

     “Territory” has the meaning specified in Section 5.15(a)(i).

     “Transaction Documents” means this Agreement and all other agreements, instruments,
certificates and other documents to be entered into or delivered by any Party, pursuant to any of
the foregoing.

     “Transferred Employees” has the meaning specified in Section 5.13(a).

45

 

ARTICLE IX.

MISCELLANEOUS

Section 9.1 Termination

     This Agreement may be terminated at any time prior to the Closing:

     (a) by mutual written agreement of the Purchaser and the Seller Representative, acting for the
Sellers;

     (b) by the Purchaser, if any of the Sellers or the Company is in breach, in any material
respect, of the representations, warranties or covenants made by any of the Sellers or the Company
in this Agreement, which breach (i) may not be cured with commercially reasonably efforts and (ii)
results in or from a Material Adverse Change; provided, however, that Purchaser may
not terminate this Agreement pursuant to this Section 9.1 (b) if such a breach is the
result of a breach of any covenant, representation or warranty of the Purchaser set forth in any
Transaction Document and such Purchaser breach renders the conditions set forth in Section
7.1 above incapable of being satisfied prior to the Closing;

     (c) by the Seller Representative, acting for the Sellers, if the Purchaser is in breach, in
any material respect, of the representations, warranties or covenants made by the Purchaser in this
Agreement, which breach (i) may not be cured with commercially reasonably efforts and (ii) results
in or from a Purchaser Material Adverse Effect; provided, that the Seller Representative may not
terminate this Agreement pursuant to this Section 9.1(c) if such breach is the result of a
breach of any covenant, representation or warranty of the Sellers or the Company set forth in any
Transaction Document and such Seller or Company breach renders the conditions set forth in
Section 7.2 above incapable of being satisfied prior to the Closing; and

     (d) by (i) the Seller Representative, acting for the Sellers, or (ii) the Purchaser, at any
time forty (40) days after the date hereof, if the Closing shall not have occurred;
provided, however, that Purchaser shall have no right to terminate this Agreement
pursuant to this subsection (d) if the Closing shall not have occurred directly or indirectly as
the result of the failure of the lenders under Purchaser’s existing credit facilities to consent to
the transactions contemplated under the Transaction Documents,

Any termination of this Agreement pursuant to Section 9.1(b) through (d) above
shall be effected by written notice from the Seller Representative, on behalf of the Sellers, to
the Purchaser (if the Sellers are the terminating party) or the Purchaser to the Seller
Representative (if the Purchaser is the terminating party). Any termination of this Agreement
pursuant to Section 9.1(b), (c) or (d) above shall not terminate the
liability of any Party for any breach or default of any covenant or other agreement set forth
herein which exists at the time of such termination.

46

 

Section 9.2 Remedies

     Except as provided in Article VI above, no failure to exercise, and no delay in
exercising, any right, remedy, power or privilege under this Agreement by any Party shall operate
as a waiver of such right, remedy, power or privilege, nor shall any single or partial exercise of
any right, remedy, power or privilege under this Agreement preclude any other or further exercise
of such right, remedy, power or privilege or the exercise of any other right, remedy, power or
privilege. Except as provided in Article VI above, the rights, remedies, powers and
privileges provided pursuant to this Agreement are cumulative and not exhaustive of any other
rights, remedies, powers and privileges which may be provided by law.

Section 9.3 Confidentiality

     The Purchaser agrees to maintain all nonpublic information regarding the Company (with respect
to the period prior to the Closing Date) and the Sellers and their respective Affiliates
confidential in a manner consistent with the obligations of the Purchaser pursuant to the
Confidentiality Agreement. Subject to applicable Legal Requirements, the Company and each Seller
agrees to maintain all nonpublic information regarding the Purchaser and its Affiliates
confidential and not to disclose any such information without the Purchaser’s prior written
consent.

Section 9.4 Consent to Amendments

     This Agreement may be amended or modified, and any provisions of this Agreement may be waived,
in each case upon the approval, in writing, executed by each of the Parties. No other course of
dealing between or among any of the Parties or any delay in exercising any rights pursuant to this
Agreement shall operate as a waiver of any rights of any Party.

Section 9.5 Successors and Assigns

     Except as otherwise expressly provided in this Agreement, all covenants and agreements set
forth in this Agreement by or on behalf of the Parties shall bind and inure to the benefit of the
respective successors and permitted assigns of the Parties, whether so expressed or not, except
that neither this Agreement nor any of the rights, interests or obligations hereunder may be
assigned by the Purchaser (on the one hand), or the Sellers or the Company (on the other hand)
without the prior written consent of the other Party; provided, however, that the
Purchaser may (a) at any time prior to the Closing), at its sole discretion, in whole or in part,
assign its rights pursuant to this Agreement, including the right to purchase the Polk Stock, to
one or more of its direct or indirect wholly owned Affiliates, (b) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases the Purchaser
nonetheless shall remain responsible for the performance of all of its obligations hereunder), and
(c) assign its rights hereunder to one or more of its lenders.

Section 9.6 Governing Law

     This Agreement shall be governed by and construed in accordance with the domestic

47

 

laws of the State of Delaware, without giving effect to any choice of law or conflict
provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the
laws of any jurisdiction other than the State of Delaware to be applied. In furtherance of the
foregoing, the internal law of the State of Delaware shall control the interpretation and
construction of this Agreement, even if under such jurisdiction’s choice of law or conflict of law
analysis, the substantive law of some other jurisdiction would ordinarily apply.

Section 9.7 Notices

     All demands, notices, communications and reports provided for in this Agreement shall be in
writing and shall be either sent by facsimile with confirmation to the number specified below or
personally delivered or sent by reputable overnight courier service (delivery charges prepaid) to
any party at the address specified below, or at such address, to the attention of such other
Person, and with such other copy, as the recipient Party has specified by prior written notice to
the sending Party pursuant to the provisions of this Section 9.7.

If to the Company:

	 	 	 
	 

	 	Polk Holding Corp.
	 

	 	5601 Metro Drive
	 

	 	Baltimore, Maryland 21215
	 

	 	Telecopy: (410) 764-6040
	 

	 	Attn: James Herd, President
	 
	 	 
	 

	 	with copies, which shall not constitute notice to the Company, to:
	 
	 	 
	 

	 	DLA Piper Rudnick Gray Cary US LLP
	 

	 	6225 Smith Avenue
	 

	 	Baltimore, Maryland 21209
	 

	 	Telecopy: (410) 580-3264
	 

	 	Attn: Wilbert H. Sirota, Esq.

If to the Sellers or the Seller Representative:

	 	 	 
	 

	 	George M. Klopfer
	 

	 	325 Front Street, #405
	 

	 	Evanston, Wyoming 82930
	 

	 	Telecopy: (435) 649-3473
	 
	 	 
	 

	 	With an additional copy to:
	 
	 	 
	 

	 	George M. Klopfer
	 

	 	5601 Metro Drive
	 

	 	Baltimore Maryland 21215
	 

	 	Telecopy: (410) 764-6040

48

 

	 	 	 
	 

	 	with copies, which shall not constitute notice to the Sellers or the
	 

	 	Seller Representative, to:
	 
	 	 
	 

	 	DLA Piper Rudnick Gray Cary US LLP
	 

	 	6225 Smith Avenue
	 

	 	Baltimore, Maryland 21209
	 

	 	Telecopy: (410) 580-3264
	 

	 	Attn: Wilbert H. Sirota, Esq.
	 

	 	               Jay G. Cohen, Esq.

If to the Purchaser:

	 	 	 
	 

	 	Directed Electronics, Inc.
	 

	 	One Viper Way
	 

	 	Vista, CA 92081
	 

	 	Telecopy: (760) 598-6400
	 

	 	Attn: James E. Minarik
	 
	 	 
	 

	 	with copies, which shall not constitute notice to the Purchaser, to:
	 
	 	 
	 

	 	Greenberg Traurig, LLP
	 

	 	2375 E. Camelback Road, Suite 700
	 

	 	Phoenix, Arizona 85016
	 

	 	Telecopy: (602) 445-8618
	 

	 	Attn: Bruce E. Macdonough, Esq.
	 

	 	               Brian H. Blaney, Esq.

     Any such demand, notice, communication or report shall be deemed to have been given pursuant
to this Agreement when delivered personally, when confirmed if by facsimile or on the Business Day
after deposit with a reputable overnight courier service, as the case may be.

Section 9.8 Schedules and Exhibits

     The Schedules and Exhibits to this Agreement constitute a part of this Agreement and are
incorporated herein by reference for all purposes as if fully set forth herein. Any disclosure
made in any Schedule to this Agreement which is reasonably applicable to another Schedule to this
Agreement shall be deemed to be made with respect to such other Schedule regardless of whether or
not a specific cross reference is made thereto, provided, that Sellers shall use their reasonable,
good faith efforts to provide accurate cross references.

Section 9.9 Counterparts

     The Parties may execute this Agreement in counterparts (no one of which need contain the
signatures of all Parties), each of which shall be an original and all of which together shall
constitute one and the same instrument.

49

 

Section 9.10 Time is of the Essence

     The Parties hereby expressly acknowledge and agree that time is of the essence for each and
every provision of this Agreement.

Section 9.11 No Third-Party Beneficiaries

     Except as otherwise expressly provided in this Agreement, no Person which is not a Party shall
have any right or obligation pursuant to this Agreement.

Section 9.12 Headings

     The headings used in this Agreement are for the purpose of reference only and shall not affect
the meaning or interpretation of any provision of this Agreement.

Section 9.13 Entire Agreement

     Except as otherwise provided in this Agreement and in the Confidentiality Agreement, this
Agreement and the Transaction Documents set forth the entire understanding of the parties relating
to the subject matter hereof, and all prior understandings, whether written or oral, are superseded
by this Agreement, and all prior understandings, and all related agreements and understandings are
hereby terminated.

Section 9.14 Recitals

     The Recitals are incorporated herein by reference and specifically made a part of this
Agreement.

Section 9.15 Severability

     Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction
will, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the
provision will be interpreted to be only so broad as is enforceable.

Section 9.16. Nature of Sellers’ Obligations

     The representations and warranties and covenants of each Seller herein concerning the
transaction contemplated herein are individual and not joint or several obligations. As a result,
the particular Seller making the representation, warranty or covenant shall be solely responsible
to the extent of a breach thereof.

50

 

Section 9.17. CONSENT TO JURISDICTION

     THE PARTIES AGREE THAT JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO
THIS AGREEMENT SHALL PROPERLY (BUT NOT EXCLUSIVELY) LIE IN ANY FEDERAL OR STATE COURT LOCATED IN
WILMINGTON, DELAWARE. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH
ACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE
ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH
ACTION. THE PARTIES FURTHER AGREE THAT THE MAILING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, OF ANY PROCESS REQUIRED BY SUCH COURT SHALL CONSTITUTE VALID AND LAWFUL SERVICE OF
PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY ANY OTHER MEANS PROVIDED BY STATUTE OR RULE
OF COURT.

Section 9.18. Seller Representative

     (a) The Sellers irrevocably make, constitute and appoint the Seller Representative as their
agent and authorize and empower him to fulfill the role of Seller Representative hereunder. In the
event of the resignation of a Seller Representative, the resigning Seller Representative shall
appoint a successor who shall agree in writing to accept such appointment, and the resigning Seller
Representative’s resignation shall not be effective until such a successor shall exist. The
Sellers holding a majority of the Polk Stock on the date hereof (a “Majority Interest”) may remove
and replace the Seller Representative at any time, provided, however, that such
replacement Seller Representative shall be reasonably acceptable to Purchaser. If a Seller
Representative should die or become incapacitated or be removed by the Sellers pursuant to this
Section 9.18, his successor shall be appointed within twenty-one (21) days after his death
or incapacity by the Sellers holding a Majority Interest, and such successor shall be reasonably
acceptable to Purchaser. If the Sellers fail to appoint a successor within such 21-day period,
then Purchaser shall have the right to appoint the successor from among the Sellers. The choice of
a successor Seller Representative appointed in any manner permitted above shall be final and
binding upon all of the Sellers and the Purchaser. The decisions and actions of any successor
Seller Representative shall be, for all purposes, those of a Seller Representative as if originally
named herein.

     (b) By the execution of this Agreement, each Seller hereby irrevocably makes, constitutes and
appoints the Seller Representative as such person’s true and lawful attorney-in-fact and agent, for
such person and in such person’s name, (i) to receive all notices and communications directed to
such Seller under this Agreement and the Transaction Documents, (ii) to execute and deliver any and
all documents required to be executed and delivered by such Seller pursuant to this Agreement in
order to effect the transactions contemplated by this Agreement, (iii) to receive and provide
receipt for all consideration required to be delivered to such Seller under this Agreement, (iv) to
perform any and all actions required to be taken by such Seller in connection with any claim for
indemnity pursuant to the provisions of Article VI

51

 

above and (v) to execute and deliver all instruments and documents of every kind incident to
the foregoing to all intents and purposes and with the same effect as such Seller could do
personally, and each Seller hereby ratifies and confirms as his, her or its own act, all that the
Seller Representative shall do or cause to be done pursuant to the provisions hereof.
Notwithstanding the foregoing, except with respect to administrative and other ministerial
tasks, the Seller Representative is required and entitled to act only at the written direction of
Sellers holding a Majority Interest.

     (c) It is acknowledged by the Sellers appointing the Seller Representative that the
designation of the Seller Representative as attorney-in-fact is coupled with an interest and is
binding upon such Sellers notwithstanding the death, incapacity or dissolution of any such Seller.
If any such event shall occur prior to the completion of the transactions contemplated by this
Agreement, the Seller Representative is, nevertheless, to the extent that he is legally able to do
so, authorized and directed to complete all transactions and act pursuant to this authority as if
such event had not occurred. Purchaser is entitled to deal solely with the Seller Representative
in connection with this Agreement and is entitled to rely upon the provisions hereof and the
authority granted to the Seller Representative to act on behalf of the Sellers.

     (d) The Seller Representative’s acceptance of his duties under this Agreement is subject to
the following terms and conditions, which the Parties hereto agree shall govern and control with
respect to his rights, duties, liabilities and immunities as Seller Representative (but not in his
capacity as a Seller or as an officer, director, or employee of the Company):

     (i) The Seller Representative, in his capacity as Seller Representative, makes no
representation and has no responsibility as to the validity of this Agreement or of any
other instrument referred to herein, or as to the correctness of any statement contained
herein, and he shall not be required to inquire as to the performance of any obligation
under this Agreement.

     (ii) The Seller Representative shall be protected in acting upon written notice,
request, waiver, consent, receipt or other paper or document, not only as to its due
execution and the validity and effectiveness of its provisions, but also as to the truth of
any information therein contained, which he in good faith believes to be genuine and what it
purports to be.

     (iii) The Seller Representative, in his capacity as Seller Representative, shall not be
liable for any error of judgment, or for any act done or step taken or omitted by him in
good faith, or for any mistake of fact or law, or for anything which he may do or refrain
from doing in connection therewith, except his own gross negligence or willful misconduct.

     (iv) The Seller Representative, in his capacity as Seller Representative, may consult
with competent and responsible legal counsel selected by him, and he shall not be liable for
any action taken or omitted by him in good faith in accordance with the advice of such
counsel.

52

 

     (v) The Sellers shall bear, in proportion to their holdings of Polk Stock on the date
hereof, all expenses, if any (including transfer taxes and other governmental charges)
incurred by the Seller Representative in connection with his duties hereunder and shall
indemnify and hold him harmless against any and all Losses incurred in connection with the
performance of this Agreement, except as a result of his own gross negligence or willful
misconduct.

     (e) The Seller Representative, in his capacity as Seller Representative, shall have no duties
or responsibilities except those expressly set forth herein.

* * *

53

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 	 	 
	 	 	DIRECTED ELECTRONICS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James E. Minarik
 

	 	 
	 	 	Name: James E. Minarik	 	 
	 	 	Title: President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	POLK HOLDING CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ George M. Klopfer	 	 
	 

	 	 	 	 	 	 
	 	 	Name: George M. Klopfer	 	 
	 	 	Title: Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	SELLER REPRESENTATIVE	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ George M. Klopfer	 	 
	 	 	 	 	 
	 	 	Name: George M. Klopfer	 	 

[Sellers signature pages follow]

54

 

SELLERS SIGNATURE PAGES

	 	 	 	 	 	 	 
	 	 	/s/ Matthew S. Polk, Jr.	 	 
	 	 	 	 	 
	 	 	Matthew S. Polk, Jr.	 	 
	 
	 	 	 	 	 	 
	 	 	MATTHEW S. POLK, JR. MARITAL TRUST	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Amy L. Gould	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Amy L. Gould, Trustee	 	 
	 
	 	 	 	 	 	 
	 	 	By his execution immediately below, Matthew S.
Polk Jr. hereby guarantees the full and complete
payment and performance of all obligations of the
Matthew S. Polk, Jr. Marital Trust under this
Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Matthew S. Polk, Jr.	 	 
	 	 	 	 	 
	 	 	Matthew S. Polk, Jr.	 	 
	 
	 	 	 	 	 	 
	 	 	GEORGE M. KLOPFER REVOCABLE TRUST	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ George M. Klopfer
 

George M. Klopfer, Trustee
	 	 
	 
	 	 	 	 	 	 
	 	 	By his execution immediately below, George M.
Klopfer hereby guarantees the full and complete
payment and performance of all obligations of
George M. Klopfer Revocable Trust under this
Agreement, and agrees to be bound by the
provisions of Section 5.15 and Section 5.21
hereof	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ George M. Klopfer	 	 
	 	 	 	 	 
	 	 	George M. Klopfer	 	 

55

 

[signatures continued from prior page]

	 	 	 	 	 	 	 
	 	 	/s/ James M. Herd	 	 
	 	 	 	 	 
	 	 	James M. Herd	 	 
	 
	 	 	 	 	 	 
	 	 	JAMES M. HERD MARITAL TRUST	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Donna Louise Herd	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Donna Louise Herd, Trustee	 	 
	 
	 	 	 	 	 	 
	 	 	By his execution immediately below, James M. Herd
hereby guarantees the full and complete payment
and performance of all obligations of the James
M. Herd Marital Trust under this Agreement	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ James M. Herd	 	 
	 	 	 	 	 
	 	 	James M. Herd	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Craig C. Georgi	 	 
	 	 	 	 	 
	 	 	Craig C. Georgi	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Peter D. Gaskarth	 	 
	 	 	 	 	 
	 	 	Peter D. Gaskarth	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Gary B. Davis	 	 
	 	 	 	 	 
	 	 	Gary B. Davis	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Stuart Lumsden	 	 
	 	 	 	 	 
	 	 	Stuart Lumsden	 	 

56

 

[signatures continued from prior page]

	 	 	 	 	 
	 	 	/s/ Keith A. Ballard
	 	 	  
	 	 	Keith A. Ballard
	 
	 	 	 	 
	 	 	/s/ Dean Tassio
	 	 	   
	 	 	Dean Tassio
	 
	 	 	 	 
	 	 	/s/ Jeffrey Nemec
	 	 	   
	 	 	Jeffrey Nemec
	 
	 	 	 	 
	 	 	/s/ Daniel Hodgson
	 	 	   
	 	 	Daniel Hodgson
	 	 	 
	 
	 	/s/ Michael Scharff
	 	 	Michael Scharff, as an option holder and with
respect to his Polk Stock obtained upon exercise
of options to acquire Polk Stock

57<PAGE>

                                                                    Exhibit 4.11

                               DTE ENERGY COMPANY
                                       AND
                            BNY MIDWEST TRUST COMPANY
                                     TRUSTEE

                                   ----------

                             SUPPLEMENTAL INDENTURE

                             DATED AS OF

                                   ----------

                SUPPLEMENTING THE AMENDED AND RESTATED INDENTURE
                            DATED AS OF APRIL 9, 2001

                                  PROVIDING FOR

                      SERIES               % SENIOR NOTES DUE

<PAGE>

     SUPPLEMENTAL INDENTURE, dated as of the    day of           ,
(the "Supplemental Indenture"), between DTE ENERGY COMPANY, a corporation
organized and existing under the laws of the State of Michigan (the "Company"),
and BNY MIDWEST TRUST COMPANY, a Illinois trust company, having its principal
office in The City of Chicago, Illinois, as trustee (the "Trustee");

     WHEREAS, the Company has heretofore executed and delivered to the Trustee
an Amended and Restated Indenture, dated as of April 9, 2001 (the "Original
Indenture"), as amended, supplemented or modified (as so amended, supplemented
or modified, the "Indenture") providing for the issuance by the Company from
time to time of its debt securities; and

     WHEREAS, the Company now desires to provide for the issuance of a series of
its unsecured, senior [convertible/exchangeable] [appropriate revisions,
insertions and/or deletions to be made to the conversion provisions or otherwise
in the event of exchangeable securities] debt securities pursuant to the
Original Indenture; and

     WHEREAS, the Company, in the exercise of the power and authority conferred
upon and reserved to it under the provisions of the Original Indenture,
including Section 901 thereof, and pursuant to appropriate resolutions of the
Board of Directors, has duly determined to make, execute and deliver to the
Trustee this Supplemental Indenture to the Original Indenture as permitted by
Section 201 and Section 301 of the Original Indenture in order to establish the
form or terms of, and to provide for the creation and issue of, a series of its
debt securities under the Original Indenture, which shall be known as the
"         Series      % Senior Notes due         " (the "Notes"); [and]

     [WHEREAS, DTE Energy Trust III, a Delaware statutory trust (the "Trust"),
has offered to the public $          aggregate liquidation amount of its      %
Trust Preferred Securities (the "Trust Preferred Securities"), representing a
preferred undivided beneficial interest in the assets of the Trust, and proposes
to invest the proceeds from such offering, together with the proceeds of the
issuance and sale by the Trust to the Company of $         aggregate liquidation
amount of its      % common securities (the "Common Securities" and, together
with the Trust Preferred Securities, the "Trust Securities"), in $
aggregate principal amount of the Notes; and]

     WHEREAS, all things necessary to make such debt securities, when executed
by the Company and authenticated and delivered by the Trustee or any
Authenticating Agent and issued upon the terms and subject to the conditions
hereinafter and in the Original Indenture set forth against payment therefor,
the valid, binding and legal obligations of the Company and to make this
Supplemental Indenture a valid, binding and legal agreement of the Company, have
been done;

     NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH that, in order to
establish the terms of a series of debt securities, and for and in consideration
of the premises and of the covenants contained in the Original Indenture and in
this Supplemental Indenture and for other good and valuable consideration the

                                        2

<PAGE>

receipt and sufficiency of which are hereby acknowledged, it is mutually
covenanted and agreed as follows:

                                   ARTICLE ONE

                              DEFINITIONS AND OTHER
                        PROVISIONS OF GENERAL APPLICATION

     SECTION 101. Definitions. Each capitalized term that is used herein and is
defined in the Original Indenture shall have the meaning specified in the
Original Indenture unless such term is otherwise defined herein; provided, that
[the following terms shall have the meanings given to them in the Agreement: (i)
Underwriting Agreement; (ii) Delaware Trustee; (iii) Distributions; (iv)
Investment Company Event; (v) Property Trustee; (vi) Trust Preferred Securities
Guarantee; (vii) Tax Event; (viii) Trust Preferred Security Certificate; (ix)
Administrative Trustee; and (x) Debenture; and, provided further that]:

     ["Additional Interest" has the meaning set forth in Section 204(e).]

     ["Agreement" means the Amended and Restated Trust Agreement of the Trust,
dated as of           .]

     ["Applicable Procedures" means, with respect to any transfer or exchange of
beneficial ownership interests in a Global Debenture, the rules and procedures
of the Depositary that are applicable to such transfer or exchange.]

     "Business Day" means any day other than a Saturday or Sunday or a day on
which commercial banks in The City of New York are required or authorized by law
or executive order to be closed.

     ["Capital Stock" means with respect to any Person organized as a
Corporation, any and all shares, interests, rights to purchase, warrants,
options, participations or other equivalents of or interest in (however
designated) corporate stock, and (ii) with respect to any Person that is not
organized as a Corporation, the partnership, membership or other equity
interests or participations in such Person.]

     ["Certificated Security" means a security in substantially the form
attached hereto as Exhibit A, except for the legend thereon, which is applicable
only to Global Notes.]

     ["Common Securities" has the meaning specified in the recitals above.]

     ["Company Notice" has the meaning specified in Section 705.]

     ["Company Notice Date" has the meaning specified in Section 705).]

     ["Conversion Agent" shall be the agent specified in Section 204(c).]

                                        3

<PAGE>

     ["Conversion Date" has the meaning specified in Section 605.]

     ["Conversion Notice" has the meaning specified in Section 605.]

     ["Conversion Price" has the meaning specified in Section 602.]

     ["Conversion Rate" has the meaning specified in Section 601.]

     ["Coupon Rate" has the meaning set forth in Section 204(b).]

     ["Creditor" has the meaning set forth in Section 401(d).]

     ["Current Market Price," on any date, means, with respect to the Common
Stock of the Company, the average of the daily closing or last sale prices for
the shorter of:

          (1) 10 consecutive Business Days ending on the last full trading day
on the exchange or market referred to in determining the daily closing or last
sale prices prior to the Time of Determination; or

          (2) the period commencing on the date next succeeding the first public
announcement of the issuance of rights or warrants or distribution through the
last full trading day prior to the Time of Determination.]

     ["Disqualified Stock" means any Capital Stock of the Company that, by its
terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, in each case at the option of the holder of the
Capital Stock), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder of the Capital Stock, in whole or in part, on or prior
to the date that is 91 days after the Stated Maturity of the Debentures.]

     ["Dissolution Event" means the dissolution of the Trust and distribution of
the Debentures held by the Property Trustee pro rata to the holders of the Trust
Securities in accordance with the Agreement, such event to occur at the option
of the Company at any time.]

     ["Excess Payment" means the excess of the aggregate of the cash and value
of other consideration paid by the Company or any of its Subsidiaries with
respect to shares acquired in a tender offer over the market value of such
acquired shares after giving effect to the completion of a tender offer.]

     ["Expiration Date" has the meaning specified in Section 609(d)(2).]

     ["Expiration Time" has the meaning specified in Section 609(d)(2).]

     ["Fundamental Change" has the meaning specified in Section 801(a).]

                                        4

<PAGE>

     ["Fundamental Change Offer" means an offer by the Company to pay cash on
the Fundamental Change Purchase Date equal to the Fundamental Change Purchase
Price.]

     ["Fundamental Change Purchase Date" has the meaning specified in Section
801.]

     ["Fundamental Change Purchase Notice" has the meaning specified in Section
801.]

     ["Fundamental Change Purchase Price" means, in connection with a
Fundamental Change Offer, 100% of the aggregate principal amount of Debentures
to be purchased in such offer, together with interest accrued to, but excluding,
the Fundamental Change Purchase Date.]

     ["Global Debentures" means the Debentures that will initially be issued in
global form under a book-entry system, registered in the name of DTC, or its
nominee, who is hereby designated as U.S. Depositary and Depositary under the
Original Indenture.]

     ["Guarantee" means each guarantee agreement executed by the Company with
respect to the Trust Preferred Securities or similar securities issued by the
Trust or another financing entity pursuant to which the Company irrevocably and
unconditionally agrees to pay the guarantee payments (as defined in such
guarantee agreement) to the holders of such Trust Preferred Securities or
similar securities.]

     ["Market Price" has the meaning specified in Section 704.]

     ["NASDAQ" means NASDAQ Stock Market, Inc.]

     ["Non Book-Entry Trust Preferred Securities" has the meaning set forth in
Section 203(a).]

     ["NYSE" means the New York Stock Exchange.]

     ["Permitted Holder" has the meaning specified in Section 801.]

     ["Prepayment Price" has the meaning set forth in Section 301.]

     ["Purchase Date" means each of           ,           ,            and
          .]

     ["Purchase Notice" has the meaning specified in Section 701.]

     ["Purchase Price" means:

          (1) in the event that the Company has elected to pay the Purchase
Price, in whole or in part, in shares of Common Stock, the number of shares of
common stock

                                        5

<PAGE>

equal to the portion of the Purchase Price to be paid in Common Stock divided by
95% of the Market Price; or

          (2) in the event that the Company has elected to pay the Purchase
Price in cash, $1,000 per $1,000 principal amount of Debentures; plus, in either
case, accrued and unpaid interest to, but excluding, the applicable Purchase
Date.]

     ["Purchased Shares" has the meaning specified in Section 609(d)(2).]

     ["purchases" has the meaning specified in Section 609(d)(3).]

     ["Rights Plan" means a plan of the Company providing for the issuance by
the Company to all holders of its Common Stock of rights entitling the holders
thereof to subscribe for or purchase shares of Common Stock or any class or
series of preferred stock, which rights (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 Common Stock, in each case until the
occurrence of a specified event or events.]

     ["Sale Price" has the meaning specified in Section 704.]

     ["Special Event" means a Tax Event or an Investment Company Event, as the
case may be.]

     ["tender offer" has the meaning specified in Section 609(d)(3).]

     ["tendered shares" has the meaning specified in Section 609(d)(3).]

     ["Time of Determination" has the meaning specified in Section 609(d)(1).]

     ["Trading Day" means a day during which trading in securities generally
occurs on the NYSE or NASDAQ or, if the Common Stock is not listed on the NYSE
or NASDAQ, on the principal other national or regional securities exchange or
market 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 other principal
market on which the Common Stock is then traded.]

     ["Triggering Distribution" has the meaning specified in Section 609(d)(1).]

     ["Trust" has the meaning specified in the recitals above.]

     ["Trust Preferred Securities" has the meaning specified in the recitals
above.]

     ["Trust Securities" has the meaning specified in the recitals above.]

     SECTION 102. Section References. Each reference to a particular section set
forth in this Supplemental Indenture shall, unless the context otherwise
requires, refer to this Supplemental Indenture.

                                        6

<PAGE>

                                   ARTICLE TWO

               TITLE AND TERMS OF THE SECURITIES; STATED MATURITY

     SECTION 201. Title of the Securities; Stated Maturity. This Supplemental
Indenture hereby establishes a series of Securities, which shall be known as the
Company's "         Series          % Senior Notes due         " (the "Notes").
The Stated Maturity on which the principal of the Notes shall be due and payable
will be                           .

     SECTION 202. Rank. The Notes shall rank equally with all other unsecured
and unsubordinated indebtedness of the Company from time to time outstanding.

     SECTION 203. Variations from the Original Indenture. [Section 1009 of the
Original Indenture shall be applicable to the Notes.] [Section 403(2) and
Section 403(3) [shall] [shall not] be applicable to the Notes; the Company's
obligations under Section 1009, without limitation, shall be subject to
defeasance in accordance with Section 403(3).]

     [Insert for convertible/exchangeable Notes] [The Original Indenture is
hereby amended, with respect to the Notes only, by replacing the final paragraph
in Section 307 of the Original Indenture with the following paragraphs:

     On conversion of a Holder's Notes, such Holder shall not receive any cash
payment of interest. The Company's delivery to a Holder of the full number of
shares of Common Stock into which a Note is convertible, together with any cash
payment for such Holder's fractional shares, shall be deemed to satisfy the
Company's obligation to pay the principal amount at maturity of the Note and to
satisfy the Company's obligation to pay accrued interest attributable to the
period from the most recent Interest Payment Date through the Conversion Date
(unless such Notes or portions thereof have been called for redemption in
accordance with Article Three hereof on a Redemption Date that occurs between a
Regular Record Date and the Interest Payment Date to which it relates, in which
case any accrued interest shall be paid to the Holders of record of such Notes
at the close of business on such Regular Record Date).

     Notwithstanding the above, if any Notes are converted after a Regular
Record Date but prior to the next succeeding Interest Payment Date, Holders of
such Notes at the close of business on such Regular Record Date shall receive
the interest payable on such Notes on the corresponding Interest Payment Date
notwithstanding the conversion. Such Notes, upon surrender for conversion, must
be accompanied by funds equal to the amount of interest payable on the principal
amount of the Notes so converted, unless such Notes have been called for
redemption on a Redemption Date that occurs between a Regular Record Date and
the Interest Payment Date to which it relates, in which case no such payment
shall be required.]

                                        7

<PAGE>

     SECTION 204. Amount and Denominations; DTC. (a) The aggregate principal
amount of the Notes that may be issued under this Supplemental Indenture is
limited initially to $                (except as provided in Section 301(2) of
the Original Indenture); provided that the Company may, without the consent of
the Holders of the Outstanding Notes, "reopen" this series of Securities so as
to increase the aggregate principal amount of the Notes Outstanding in
compliance with the procedures set forth in the Original Indenture, including
Section 301 and Section 303 thereof, so long as any such additional Notes have
the same tenor and terms (including, without limitation, rights to receive
accrued and unpaid interest) as the Notes then Outstanding. No additional Notes
may be issued if an Event of Default has occurred. The Notes shall be issuable
only in fully registered form and, as permitted by Section 301 and Section 302
of the Original Indenture, in denominations of [$1,000] and integral multiples
thereof. The Notes will initially be issued in global form (the "Global Notes")
under a book-entry system, registered in the name of The Depository Trust
Company, as depository ("DTC"), or its nominee, which is hereby designated as
"U.S. Depositary" and "Depositary" under the Original Indenture.

     (b) Further to Section 305 of the Original Indenture, any Global Note shall
be exchangeable for Notes registered in the name of, and a transfer of a Global
Note of any series may be registered to, any Person other than the Depositary
for such Note or its nominee only if (i) such Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for such Global Note or
if at any time such Depositary ceases to be a clearing agency registered under
the Exchange Act, and, in either such case, the Company does not appoint a
successor Depositary within 90 days thereafter, (ii) the Company executes and
delivers to the Trustee a Company Order that such Global Note shall be so
exchangeable and the transfer thereof so registrable or (iii) there shall have
occurred and be continuing an Event of Default or an event which, with the
giving of notice or lapse of time, or both, would constitute an Event of Default
with respect to the Notes of such series. Upon the occurrence in respect of any
Global Note of any series of any or more of the conditions specified in clause
(i), (ii) or (iii) of the preceding sentence, such Global Note may be exchanged
for Notes registered in the name of, and the transfer of such Global Note may be
registered to, such Persons (including Persons other than the Depositary with
respect to such series and its nominees) as such Depositary, in the case of an
exchange, and the Company, in the case of a transfer, shall direct.

     [Insert in connection with issuance of Trust Preferred Securities] [In
connection with a Dissolution Event,

          (i) the Notes in certificated form may be presented to the Trustee by
the Property Trustee in exchange for a global Note in an aggregate principal
amount equal to the aggregate principal amount of all outstanding Notes (a
"Global Note"), to be registered in the name of the Depositary, or its nominee,
and delivered by the Trustee to the Depositary for crediting to the accounts of
its participants pursuant to the instructions of the Administrative Trustees.
The Company upon any such presentation shall execute a Global Note in such
aggregate principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with the Original Indenture and this

                                        8

<PAGE>

Supplemental Indenture. Payments on the Notes issued as a Global Note will be
made to the Depositary; and

          (ii) if any Trust Preferred Securities are held in non book-entry
certificated form, the Notes in certificated form may be presented to the
Trustee by the Property Trustee and any Trust Preferred Security Certificate
which represents Trust Preferred Securities other than Trust Preferred
Securities held by the Depositary or its nominee ("Non Book-Entry Trust
Preferred Securities") will be deemed to represent beneficial interests in Notes
presented to the Trustee by the Property Trustee having an aggregate principal
amount equal to the aggregate liquidation amount of the Non Book-Entry Trust
Preferred Securities until such Trust Preferred Security Certificates
represented to the Security Registrar for transfer or reissuance, at which time
such Trust Preferred Security Certificates will be canceled and a Note,
registered in the name of the holder of the Trust Preferred Security Certificate
or the transferee of the holder of such Trust Preferred Security Certificate, as
the case may be, with an aggregate principal amount equal to the aggregate
liquidation amount of the Trust Preferred Security Certificate canceled, will be
executed by the Company and delivered to the Trustee for authentication and
delivery in accordance with the Original Indenture and this Supplemental
Indenture. On issue of such Notes, Notes with an equivalent aggregate principal
amount that were presented by the Property Trustee to the Trustee will be deemed
to have been canceled.]

     SECTION 205. Terms of the Notes.

     (a) [The Notes shall bear interest at the rate of        % per annum on the
principal amount thereof from the date of issuance or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
until the principal of the Notes becomes due and payable, and on any overdue
principal and premium and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum during such overdue period. Interest on this Note will be
payable [semiannually][quarterly] in arrears on
[,                  ,                  ] and                of each year (each
such date, an "Interest Payment Date"), commencing                         .]
[The amount of interest payable for any period shall be computed on the basis of
[twelve 30-day months and a 360-day year][a 360-day year and the actual number
of days elapsed in such period] [the actual number of days in the year] and, for
any period shorter than a full [semiannual][quarterly] interest period, will be
computed on the basis of the actual number of days elapsed in such period.]

          [If the Notes are not to bear interest prior to Stated Maturity,
insert] [The principal of the Notes shall not bear interest except in the case
of a default in payment of principal upon acceleration, upon redemption or at
Stated Maturity and in such case the overdue principal and any overdue premium
shall bear interest at the rate of [yield to maturity] % per annum (to the
extent that the payment of such interest shall be legally enforceable), which
shall accrue from the date of such default in payment to the date payment of
such principal has been made or duly provided for. Interest on any overdue
principal or premium shall be payable on demand. Any such interest on any
overdue

                                        9

<PAGE>

principal or premium that is not so paid on demand shall bear interest at the
rate of [yield to maturity] % per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
demand for payment to the date payment of such interest has been made or duly
provided for, and such interest shall also be payable on demand.]

     (b) In the event that any Interest Payment Date, redemption date or other
date of Maturity of the Notes is not a Business Day, then payment of the amount
payable on such date will be made on the next succeeding day which is a Business
Day [(and without any interest or other payment in respect of any such delay),]
[except that, if such Business Day is in the next succeeding calendar
[year][month], such payment shall be made on the immediately preceding Business
Day] [without reduction in the amount due to such early payment], in each case
with the same force and effect as if made on such date.] The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date with respect to any Note will, as provided in the Original
Indenture, be paid to the person in whose name the Note (or one or more
Predecessor Securities, as defined in said Indenture) is registered at the close
of business on the relevant record date for such interest installment, which
shall be the [fifteenth calendar day (whether or not a Business Day)] prior to
the relevant Interest Payment Date (the "Regular Record Date"). Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holders on such Regular Record Date, and
may either be paid to the person in whose name the Note (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date to be fixed by the Trustee for the payment of such defaulted
interest, notice whereof shall be given to the registered Holders of this series
of Notes not less than ten days prior to such Special Record Date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in the Original Indenture. The principal of [, and premium, if any,] and the
interest on the Notes shall be payable at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
in any coin or currency of the United States of America which at the time of
payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the registered Holder at the close of business on the Regular
Record Date at such address as shall appear in the Security Register.]

     [Alternate provisions in connection with issuance of Trust Preferred
Securities] [Each Note will bear interest at the rate of         % per annum
(the "Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and, to the extent
that payment of such interest is enforceable under applicable law, on any
overdue installment of interest at the Coupon Rate, compounded quarterly,
payable quarterly in arrears on                      ,                      ,
                       and                        of each year (each, an
"Interest Payment Date"), commencing on                       , to the Person in
whose name such Note or any predecessor Note is registered at the close of
business on the relevant record date, which will be, as long as the Trust
Preferred Securities remain in book-entry form (or if no Trust

                                       10

<PAGE>

Preferred Securities remain outstanding, as long as the Notes remain in book
entry form), one Business Day prior to the relevant Interest Payment Date and,
in the event the Trust Preferred Securities are not in book-entry form (or if no
Trust Preferred Securities remain outstanding, in the event the Notes are not in
book entry form), the 15th calendar day, whether or not a Business Day,
preceding the applicable Interest Payment Date.

     The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. Except as provided in the following
sentence, the amount of interest payable for any period shorter than a full
quarterly period for which interest is computed, will be computed on the basis
of the actual number of days elapsed per calendar month (but not to exceed 30
days in any month). In the event that any date on which interest is payable on
the Notes is not a Business Day, then payment of interest payable on such date
will be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on the date that such interest otherwise would have been
payable.

     [In addition to any right of Direct Action granted under Section 3.8(e) of
the Trust Agreement to the holders of Trust Preferred Securities, if the
Property Trustee fails to enforce its rights under the Trust Agreement or the
Indenture to the fullest extent permitted by law and subject to the terms of the
Trust Agreement and the Indenture, then a holder of Trust Preferred Securities
may directly institute a proceeding against the Company to enforce the Property
Trustee's rights under the Trust Agreement or the Indenture without first
instituting a legal proceeding against the Property Trustee or any other
person.]]

     (c) [Insert for Original Issue Discount Notes] [If an Event of Default with
respect to Notes of this series shall occur and be continuing, an amount of
principal of the Notes of this series (the "Acceleration Amount") may be
declared due and payable in the manner and with the effect provided in the
Original Indenture. In case of a declaration of acceleration on or before
                             and on                        in any year, the
Acceleration Amount per                        principal amount at Stated
Maturity of the Notes shall be equal to the amount set forth in respect of such
date below:

<TABLE>
<CAPTION>
                                 Acceleration Amount
Date of Acceleration   per principal amount of Stated Maturity
--------------------   ---------------------------------------
<S>                    <C>

</TABLE>

and in case of a declaration of acceleration on any other date, the Acceleration
Amount shall be equal to the Acceleration Amount as of the next preceding date
set forth in the table above, plus accrued original issue discount (computed in
accordance with the

                                       11

<PAGE>

method used for calculating the amount of original issue discount that accrues
for U.S. Federal income tax purposes) from such next preceding date to the date
of declaration at the yield to maturity. For the purpose of this computation the
yield to maturity is          %. Upon payment (i) of the Acceleration Amount so
declared due and payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the payment of such interest
shall be legally enforceable), all of the Company's obligations in respect of
the payment of the principal of and interest, if any, on the Notes of this
series shall terminate.

     (d) [Insert for convertible/exchangeable Notes] [The Company shall maintain
an office or agency where Notes may be presented for conversion ("Conversion
Agent"). The Company may have one or more additional conversion agents.

          The Company shall enter into an appropriate agency agreement with any
Conversion Agent (other than the Trustee). The agreement shall implement the
provisions of the Indenture and this Supplemental Indenture that relate to such
agent. The Company shall notify the Trustee of the name and address of any such
agent. If the Company fails to maintain a Conversion Agent, the Trustee shall
act as such and shall be entitled to appropriate compensation therefor pursuant
to Section 606 of the Original Indenture. The Company or any Subsidiary or an
Affiliate of either of them may act as Conversion Agent.

     The Company initially appoints the Trustee as Conversion Agent in
connection with the Notes.]

     (e) Maturity, [conversion,] [purchase by the Company at the option of the
Holder] or redemption of a Note shall cause interest to cease to accrue on such
Note subject to the Company's obligation to pay interest on overdue amounts in
accordance with Section 503 of the Original Indenture and the terms of the
Notes.

     (f) [Insert in connection with issuance of Trust Preferred Securities] [The
following shall be additional covenants of the Company with respect to the
Notes:

          (i) So long as no Event of Default has occurred and is continuing, in
the event that (A) the Trust is the holder of all of the Outstanding Notes, (B)
a Tax Event in respect of the Trust shall have occurred and be continuing and
(iii) the Company shall not have (a) redeemed the Notes or (b) terminated the
Trust pursuant to the termination provisions of the related Trust Agreement, the
Company shall pay to the Trust (and any permitted successor or assign under the
related Trust Agreement) for so long as the Trust (or its permitted successor or
assignee) is the registered holder of any Notes, such additional amounts as may
be necessary in order that the amount of Distributions then due and payable by
the Trust on the related Trust Preferred Securities and Common Securities that
at any time remain outstanding in accordance with the terms thereof shall not be
reduced as a result of any additional taxes, duties and other governmental
charges to which the Trust has become subject as a result of such Tax Event (but
not including withholding taxes imposed on holders of such Trust Preferred
Securities and Common

                                       12

<PAGE>

Securities) (the "Additional Interest"). Whenever in the Indenture or the Notes
there is a reference in any context to the payment of principal of or interest
on the Notes, such reference shall be deemed to include payment of the
Additional Interest provided for in this paragraph to the extent that, in such
context, Additional Interest is, were or would be payable in respect thereof
pursuant to the provisions of this Section and express reference to the payment
of Additional Interest (if applicable) in any provisions hereof shall not be
construed as excluding Additional Interest in those provisions hereof where such
express reference is not made.

          (ii) The Company also covenants with each holder of Notes (A) to
maintain directly or indirectly 100% ownership of the Common Securities of the
Trust; provided, however, that any permitted successor or assignee of the
Company hereunder may succeed to the Company's ownership of such Common
Securities, (B) not to voluntarily terminate, wind up or liquidate the Trust,
except (x) in connection with a prepayment in full of the Notes or a
distribution of the Notes of such series to the holders of Trust Preferred
Securities in liquidation of the Trust or (y) in connection with certain
mergers, consolidations or amalgamations permitted by the Trust Agreement and
(iii) to use its reasonable efforts, consistent with the terms and provisions of
the Trust Agreement, to cause such Trust to remain classified as a grantor trust
and not an association taxable as a corporation for United States federal income
tax purposes.]

     (g) [The Company shall have the right to (i) shorten the Stated Maturity of
the principal of the Notes at any time to any date not earlier than the first
date on which the Company has the right, if any, to redeem the Notes, and (ii)
extend the Stated Maturity of the principal of the Notes at any time at its
election for one or more periods, but in no event to a date later than the
[49th] anniversary of the first interest payment date following the original
issue date of the Notes; provided that, if the Company elects to exercise its
right to extend the Stated Maturity of the principal of the Notes pursuant to
this clause (ii), at the time such election is made and at the time of extension
(A) the Company is not in bankruptcy, otherwise insolvent or in liquidation, (B)
the Company is not in default in the payment of any interest or principal on the
Notes, (C) the Trust is not in arrears on payments of Distributions on the Trust
Preferred Securities issued by the Trust, and (D) the Notes are rated not less
than BBB- by Standard & Poor's Ratings Services or Baa3 by Moody's Investors
Service, Inc. or the equivalent by any other nationally recognized statistical
rating organization. In the event the Company elects to shorten or extend the
Stated Maturity of the Notes, it shall give notice to the Trustee (not less than
45 days prior to the effectiveness thereof), and the Trustee shall give notice
of such shortening or extension to the holders not less than 30 nor more than 60
days prior to the effectiveness thereof.]

     (h) [Each Note issued hereunder shall provide that the Company and, by its
acceptance of a Note or a beneficial interest therein, the holder of, and any
Person that acquires a beneficial interest in, such Note agree that for United
States federal, state and local tax purposes it is intended that such Note
constitute indebtedness.]

                                       13

<PAGE>

     (i) The Notes shall have such other terms and provisions as are set forth
in the form of Note attached hereto as Exhibit A (all of which are incorporated
by reference in and made a part of this Supplemental Indenture as if set forth
in full at this place).

     SECTION 206. Form of Notes. Attached hereto as Exhibit A is a form of the
Notes.

                                  ARTICLE THREE

                             REDEMPTION OF THE NOTES

     SECTION 301. Optional Redemption.

     [[Except as provided in Articles Seven and Eight hereof] [t]The Notes are
not subject to repayment at the option of the Holders thereof.] [[Except as
provided in the form of Note attached hereto as Exhibit A,] [T][t]he Notes are
not redeemable by the Company prior to maturity.]

     [Insert in connection with the issuance of Trust Preferred Securities] [The
Notes are prepayable prior to the Stated Maturity at the option of the Company
(i) in whole or in part, from time to time, or after
or (ii) at any time prior to                                 , in whole but not
in part, within 180 days following the occurrence of a Special Event, in either
case at a prepayment price (the "Prepayment Price") equal to                   ,
plus accrued and unpaid interest thereon (including Additional Interest and
Compound Interest, if any) to the date of prepayment.

     SECTION 302. Redemption Procedures.

     Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Notes to be prepaid at its
registered address. Unless the Company defaults in payment of the [Prepayment
Price,] on and after the Redemption Date interest shall cease to accrue on such
Notes called for redemption. If the Notes are only partially redeemed pursuant
to Section 301, the Notes will be redeemed pro rata or by lot or by any other
method utilized by the Trustee; provided, that if at the time of redemption the
Notes are registered as a Global Note, the Depositary shall determine, in
accordance with its procedures, the principal amount of such Notes held by each
Depositary participant to be redeemed. The [Prepayment Price] shall be paid
prior to 12:00 noon, New York time, on the date of such prepayment or at such
earlier time as the Company determines; provided that the Company shall deposit
with the Trustee an amount sufficient to pay the [Prepayment Price] by 10:00
a.m., New York time, on the date such [Prepayment Price] is to be paid.

     SECTION 303. [No Sinking Fund.

     The Notes are not entitled to the benefit of any sinking fund.]

                                       14

<PAGE>

                                  [ARTICLE FOUR

                                    EXPENSES

     [Insert in connection with issuance of Trust Preferred Securities]

     SECTION 401. Payment of Expenses.

     In connection with the offering, sale and issuance of the Notes to the
Property Trustee and in connection with the sale of the Trust Securities by the
Trust, the Company, in its capacity as borrower with respect to the Notes,
shall:

     (a) pay all costs and expenses relating to the offering, sale and issuance
of the Notes, including commissions to the underwriter payable pursuant to the
Underwriting Agreement and compensation of the Trustee under the Indenture in
accordance with the provisions of Section 606 of the Original Indenture;

     (b) be responsible for and shall pay all debts and obligations (other than
with respect to the Trust Securities) and all costs and expenses of the Trust
(including, but not limited to, costs and expenses relating to the organization,
maintenance and dissolution of the Trust, the offering, sale and issuance of the
Trust Securities (including commissions to the underwriters in connection
therewith), the fees and expenses (including reasonable counsel fees and
expenses) of the Property Trustee, the Delaware Trustee and the Administrative
Trustees (including any amounts payable under Article 10 of the Agreement), the
costs and expenses relating to the operation of the Trust, including without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets and the enforcement by the Property Trustee of the
rights of the holders of the Trust Preferred Securities);

     (c) be liable for any indemnification obligations arising with respect to
the Agreement; and

     (d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.

     The Company's obligations under this Section 401 shall be for the benefit
of, and shall be enforceable by, any Person to whom such debts, obligations,
costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor
has received notice hereof. Any such Creditor may enforce the Company's
obligations under this Section 401 directly against the Company and the Company
irrevocably waives any right of remedy to require that any such Creditor take
any action against the Trust or any other Person

                                       15

<PAGE>

before proceeding against the Company. The Company agrees to execute such
additional agreements as may be necessary or desirable in order to give full
effect to the provisions of this Section 401.

     The provisions of this Section shall survive the termination of this
Supplemental Indenture.

     SECTION 402. Payment Upon Resignation or Removal.

     Upon termination of this Supplemental Indenture or the Indenture or the
removal or resignation of the Trustee, unless otherwise stated, the Company
shall pay to the Trustee all amounts accrued to the date of such termination,
removal or resignation that are payable pursuant to Section 606 of the Original
Indenture. Upon termination of the Agreement or the removal or resignation of
the Delaware Trustee or the Property Trustee, as the case may be, pursuant to
Section 5.6 of the Agreement, the Company shall pay to the Delaware Trustee or
the Property Trustee, as the case may be, all amounts accrued to the date of
such termination, removal or resignation.]

                                  [ARTICLE FIVE

                          COVENANT TO LIST ON EXCHANGE

       [Insert in connection with issuance of trust preferred securities]

     SECTION 501. Listing on an Exchange.

     If the Notes are distributed to the holders of the Securities issued by the
Trust, and the Trust Preferred Securities are then so listed, the Company will
use its best efforts to list such Notes on the New York Stock Exchange, Inc. or
on such other exchange as the Trust Preferred Securities are then listed.]

                                  [ARTICLE SIX

                                   CONVERSION

                   [Insert for convertible/exchangeable notes]

     SECTION 601. Conversion Rights.

     Notes shall be convertible in accordance with their terms and in accordance
with this Article.

     The initial conversion rate (the "Conversion Rate") is              shares
of Common Stock per $1,000 principal amount of Notes, subject to adjustment as a
result of adjustments to the Conversion Price upon the occurrence of certain
events described in this Article. A Holder of a Note otherwise entitled to a
fractional share shall receive cash

                                       16

<PAGE>

in an amount equal to the value of such fractional share based on the Sale Price
on the Trading Day immediately preceding the Conversion Date.

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

     SECTION 602. Conversion Rights Based on Common Stock Price.

     The Holder of any Note shall have the right, exercisable at any time after
the date of original issuance of the Note and before the close of business on
the Business Day immediately preceding the Stated Maturity of the Notes, to
convert the principal amount of the Note (or any portion of it that is an
integral multiple of $1,000) into shares of Common Stock at the Conversion
Price.

     The "Conversion Price" per share shall initially equal $         and shall
be adjusted as described in Section 609.

     SECTION 603. Conversion Rights Upon Notice of Redemption.

     In case a Note or portion thereof is called for redemption pursuant to
Article Three hereof, a Holder of such Note may surrender it for conversion at
any time prior to the close of business on the Business Day immediately
preceding the Redemption Date for such Note, unless the Company shall default in
making the payment of the Redemption Price when due, in which case the
conversion right shall terminate at the close of business on the date such
default is cured and such Redemption Price is paid.

     SECTION 604. Conversion Rights Upon Occurrence of Certain Corporate
Transactions.

     If the Company is a party to a consolidation, merger or binding share
exchange pursuant to which the shares of Common Stock would be converted into
cash, securities or other property, at the effective time of the transaction,
the right to convert a Note into shares of Common Stock shall be changed into a
right to convert such Note, without the consent of any Holders of the Notes,
into the kind and amount of cash, securities or other property of the Company or
another Person which the Holder would have received if the Holder had converted
such Note immediately prior to the transaction.

     SECTION 605. Conversion Procedures.

     To convert a Note, a Holder must (a) complete and manually sign the
conversion notice (the "Conversion Notice") or a facsimile thereof on the back
of the Note and deliver such notice to a Conversion Agent, (b) surrender the
Note to a Conversion Agent, (c) furnish appropriate endorsements and transfer
documents if required by the Security Registrar or a Conversion Agent and (d)
pay any transfer or similar tax, if required. The date on which the Holder
satisfies all of those requirements is the "Conversion Date."

                                       17

<PAGE>

The Company shall deliver to the Holder through the Conversion Agent, as soon as
practicable but in any event no later than the fifth Business Day following the
Conversion Date, a certificate for the number of whole shares of Common Stock
issuable upon the conversion and cash in lieu of any fractional shares pursuant
to Section 606. Anything herein to the contrary notwithstanding, in the case of
Global Notes, conversion notices may be delivered and such Notes may be
surrendered for conversion in accordance with the Applicable Procedures of the
Depositary as in effect from time to time. The Person in whose name the Common
Stock certificate is registered shall be deemed to be a shareholder of record on
the Conversion Date; provided, however, that no surrender of a Note on any date
when the stock transfer books of the Company are closed shall be effective to
constitute the Person or Persons entitled to receive the shares of Common Stock
upon such conversion as the record holder or holders of such shares of Common
Stock on such date, but such surrender shall be effective to constitute the
Person or Persons entitled to receive such shares of Common Stock as the record
holder or holders thereof for all purposes at the close of business on the next
succeeding day on which such stock transfer books are open; provided further,
however, that such conversion shall be at the Conversion Rate in effect on the
date that such Note shall have been surrendered for conversion, as if the stock
transfer books of the Company had not been closed. Upon conversion of a Note,
such Person shall no longer be a Holder of such Note.

     No payment or adjustment shall be made for dividends on, or other
distributions with respect to, any Common Stock except as provided in this
Article. On conversion of a Note, except as provided below in the case of
certain Notes or portions thereof called for redemption, that portion of accrued
and unpaid interest on the converted Note attributable to the period from the
most recent Interest Payment Date (or, if no Interest Payment Date has occurred,
from the date of original issuance of the Notes) through the Conversion Date
attributable to the most recent accrual 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), 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 accrued and unpaid interest 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 the principal amount of the Note being converted pursuant to the provisions
hereof.

     If a Holder converts more than one Note at the same time, the number of
shares of Common Stock issuable upon the conversion shall be based on the
aggregate principal amount of Notes converted.

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

                                       18

<PAGE>

     Notes or portions thereof surrendered for conversion during the period from
the close of business on any Regular Record Date immediately preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
shall (except for Notes called for redemption pursuant to Article Three hereof
on a Redemption Date that occurs during the period between the close of business
on a Regular Record Date and the close of business on the Interest Payment Date
to which such Regular Record Date relates) be accompanied by payment to the
Company or its order, in New York Clearing House funds or other funds acceptable
to the Company, of an amount equal to the interest payable on such Interest
Payment Date on the principal amount of Notes or portions thereof being
surrendered for conversion.

     SECTION 606. Fractional Shares.

     The Company shall not issue a fractional share of Common Stock upon
conversion of a Note. Instead, the Company will deliver cash for the current
market value of the fractional share. The current market value of a fractional
share of Common Stock shall be determined, to the nearest 1/1,000th of a share,
by multiplying the Sale Price on the Trading Day immediately prior to the
Conversion Date, of a full share of Common Stock by the fractional amount and
rounding the product to the nearest whole cent.

     SECTION 607. Taxes on Conversion.

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

     SECTION 608. Company to Provide Common Stock.

     The Company shall, prior to issuance of any Notes under this Supplemental
Indenture, and from time to time as may be necessary, reserve, out of its
authorized but unissued Common Stock, a sufficient number of shares of Common
Stock to permit the conversion of all Notes Outstanding into shares of Common
Stock. All shares of Common Stock delivered upon conversion of the Notes shall
be newly issued shares, shall be duly authorized, validly issued, fully paid and
nonassessable and shall be free from preemptive rights and free of any Lien or
adverse claim.

     The Company shall endeavor promptly to comply with all federal and state
securities laws regulating the registration of the offer and delivery of shares
of Common Stock to a converting Holder upon conversion of Notes, if any, and
shall list or cause to

                                       19

<PAGE>

have quoted such shares of Common Stock on each national securities exchange or
other over-the-counter market or such other market on which the Common Stock is
then listed or quoted.

     SECTION 609. Adjustment of Conversion Price.

     The Conversion Price shall be adjusted from time to time by the Company as
follows:

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

     (b) In case the Company issues rights or warrants to all or substantially
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock (or securities convertible into Common Stock) at a price
per share (or having a conversion price per share) less than the then Current
Market Price per share of Common Stock on the record date for the determination
of shareholders entitled to receive such rights or warrants, the Conversion
Price in effect immediately prior thereto shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on such record date plus the
number of shares which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered, which shall be determined by multiplying the
number of shares of Common Stock issuable upon conversion of such convertible
securities by the conversion price per share of Common Stock pursuant to the
terms of such convertible securities) would purchase at the then Current Market
Price per share of Common Stock on such record date, and of which the
denominator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock offered (or
into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever any such rights or warrants are
issued, and shall become effective immediately after such record date. If at the
end of the period during which such rights or warrants are exercisable not all
rights or warrants shall have been exercised, the adjusted Conversion Price
shall be immediately readjusted to what it would have been based upon the number
of additional shares of Common Stock actually issued (or the number of shares of
Common Stock issuable upon conversion of convertible securities actually
issued).

                                       20

<PAGE>

     (c) In case the Company distributes to all or substantially all holders of
its Common Stock any shares of Capital Stock (other than dividends or
distributions of Common Stock on Common Stock to which Section 609(a) applies)
of the Company, evidences of indebtedness or other assets (including securities
of any Person other than the Company, but excluding all-cash distributions or
any rights or warrants referred to in Section 609(b)), then in each such case
the Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the current Conversion Price by a fraction of which
the numerator shall be the then Current Market Price per share of the Common
Stock on the record date referred to below less the fair market value on such
record date (as determined by the Board of Directors, whose determination shall
be conclusive evidence of such fair market value and which shall be evidenced by
an Officers' Certificate delivered to the Trustee) of the portion of the Capital
Stock, evidences of indebtedness or other non-cash assets so distributed
applicable to one share of Common Stock (determined on the basis of the number
of shares of Common Stock outstanding on the record date) and of which the
denominator shall be the then Current Market Price per share of the Common Stock
on such record date. Such adjustment shall be made successively whenever any
such distribution is made and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
distribution.

     In the event that the Company implements a shareholder rights plan, such
rights plan may provide, if the Company so elects and subject to customary
exceptions and limitations, that upon conversion of the Notes the Holders will
receive, in addition to the Common Stock issuable upon such conversion, the
rights issued under such rights plan (notwithstanding the occurrence of an event
causing such rights to separate from the Common Stock at or prior to the time of
conversion) in lieu of making any adjustments to the Conversion Price in
accordance with the provisions of the immediately preceding paragraph. Any
distribution of rights or warrants pursuant to a shareholder rights plan
complying with the requirements set forth in the immediately preceding sentence
of this paragraph shall not constitute a distribution of rights or warrants for
the purposes of this Section 609(c) or any other provision of this Section 609.

     (d)(1) In case the Company, by dividend or otherwise, at any time
distributes (a "Triggering Distribution") to all holders of its Common Stock
cash distributions in an aggregate amount that, together with the aggregate
amount of (A) any other cash distributions to all holders of Common Stock within
the 12 months preceding the date fixed for determining the stockholders entitled
to such Triggering Distribution and in respect of which no Conversion Price
adjustment pursuant to this Section 609 has been made and (B) all Excess
Payments in respect of each tender offer by the Company or any of its
Subsidiaries for Common Stock concluded within the 12 months preceding the date
of payment of the Triggering Distribution and in respect of which no Conversion
Price adjustment pursuant to this Section 609 has been made, exceeds an amount
equal to 15% of the product of the Current Market Price per share of Common
Stock on the date fixed for the determination of stockholders entitled to
receive such Triggering Distribution (the "Time of Determination") multiplied by
the number of shares of Common Stock outstanding on such date (excluding shares
held in the treasury of the Company), the

                                       21

<PAGE>

Conversion Price shall be decreased so that the same shall equal the price
determined by multiplying such Conversion Price in effect immediately prior to
the Time of Determination by a fraction of which the numerator shall be the
Current Market Price per share of Common Stock at the Time of Determination less
the sum of the aggregate amount of cash so distributed, paid or payable within
such 12 months (including, without limitation, the Triggering Distribution)
applicable to one share of Common Stock (determined on the basis of the number
of shares of Common Stock outstanding at the Time of Determination), and the
denominator shall be such Current Market Price per share of Common Stock on the
Time of Determination, such decrease to become effective immediately prior to
the opening of business on the day following the date on which the Triggering
Distribution is paid.

     (2) In the case of the payment of an Excess Payment in respect of a tender
offer by the Company or any Subsidiary for Common Stock that, together with the
aggregate amount of (A) any cash distributions made within the 12 months
preceding the date of the Expiration Date (as defined below) and in respect of
which no Conversion Price adjustment pursuant to this Section 609 has been made
and (B) all other Excess Payments in respect of each tender offer by the Company
or any Subsidiary for Common Stock concluded within the 12 months preceding the
Expiration Date and in respect of which no Conversion Price adjustment pursuant
to this Section 609 has been made, exceeds an amount equal to 15% of the product
of the Current Market Price per share of Common Stock as of the last date (the
"Expiration Date") tenders could have been made pursuant to such tender offer
(as it may be amended) (the last time at which such tenders could have been made
on the Expiration Date is hereinafter sometimes called the "Expiration Time")
multiplied by the number of shares of Common Stock outstanding (including
tendered shares but excluding any shares held in the treasury of the Company) at
the Expiration Time, then, immediately prior to the opening of business on the
day after the Expiration Date, the Conversion Price shall be decreased so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to close of business on the Expiration Date by a
fraction of which the numerator shall be the product of the number of shares of
Common Stock outstanding (including tendered shares but excluding any shares
held in the treasury of the Company) at the Expiration Time multiplied by the
Current Market Price per share of Common Stock on the Trading Day next
succeeding the Expiration Date, and the denominator shall be the sum of (x) the
aggregate consideration (determined as aforesaid) payable to stockholders based
on the acceptance (up to any maximum specified in the terms of the tender offer)
of all shares validly tendered 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 and excluding any shares held in the
treasury of the Company) at the Expiration Time and the Current Market Price per
share of Common Stock on the Trading Day next succeeding the Expiration Date,
such decrease to become effective immediately prior to the opening of business
on the day following the Expiration Date. In the event that the Company is
obligated to purchase shares pursuant to any such tender offer, but the Company
is permanently prevented by applicable law from effecting any or all such
purchases or any or all such purchases are rescinded, the Conversion Price shall
again be

                                       22

<PAGE>

adjusted to be the Conversion Price which would have been in effect based upon
the number of shares actually purchased. If the application of this Section
609(d)(2) to any tender offer would result in an increase in the Conversion
Price, no adjustment shall be made for such tender offer under this Section
609(d)(2).

     (3) For purposes of this Section 609(d), the term "tender offer" shall mean
and include both tender offers and exchange offers, all references to
"purchases" of shares in tender offers (and all similar references) shall mean
and include both the purchase of shares in tender offers and the acquisition of
shares pursuant to exchange offers, and all references to "tendered shares" (and
all similar references) shall mean and include shares tendered in both tender
offers and exchange offers.

     (e) [reserved]

     (f) In any case in which this Section 609 requires that an adjustment be
made following a record date or a Time of Determination or Expiration Date, as
the case may be, established for purposes of this Section 609, the Company may
elect to defer (but only until five Business Days following the filing by the
Company with the Trustee of the certificate described in Section 612) issuing to
the Holder of any Notes converted after such record date or Time of
Determination or Expiration Date the shares of Common Stock and other Capital
Stock of the Company issuable upon such conversion over and above the shares of
Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion Price prior to adjustment; and,
in lieu of the shares the issuance of which is so deferred, the Company shall
issue or cause its transfer agents to issue due bills or other appropriate
evidence prepared by the Company of the right to receive such shares. If any
distribution in respect of which an adjustment to the Conversion Price is
required to be made as of the record date or Time of Determination or Expiration
Date therefor is not thereafter made or paid by the Company for any reason, the
Conversion Price shall be readjusted to the Conversion Price which would then be
in effect if such record date had not been fixed or such effective date or Time
of Determination or Expiration Date had not occurred.

     (g) Upon adjustment of the Conversion Price pursuant to this Section 609,
the Conversion Price shall be rounded to the nearest $.001, with $.0005 being
rounded upward.

     (h) Upon the election by the Company to make a distribution as described in
paragraphs (b), (c) and (d) of this Section 609, which in the case of paragraph
(d) has a per share value equal to more than 15% of the Sale Price of shares of
Common Stock on the Trading Day preceding the Agreement date for such
distribution, the Company shall give notice to Holders of the Notes not less
than 20 days prior to the ex-dividend date for such distribution. Upon giving
such notice, Holders may surrender the Notes for conversion pursuant to this
Article Six at any time until the close of business on the Business Day prior to
the ex-dividend date or until the Company publicly announces that such
distribution will not be given effect.

                                       23

<PAGE>

     SECTION 610. No Adjustment.

     No adjustment in the Conversion Price shall be required unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Price as last adjusted; provided, however, that any adjustments which
by reason of this Section 610 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 610 shall be made to the nearest cent or to the nearest
1/100th of a share, as the case may be.

     Except pursuant to Section 614, no adjustment in the Conversion Price shall
be made by reason of the completion of a merger, consolidation or other
transaction effected with one of the Company's Affiliates for the purpose of (1)
changing the jurisdiction of organization of the Company or (2) effecting a
corporate reorganization including, without limitation, the implementation of a
holding company structure.

     No adjustment need be made for issuances of Common Stock pursuant to a
Company plan for reinvestment of dividends or interest or for a change in the
par value or a change to no par value of the Common Stock.

     SECTION 611. Adjustment for Tax Purposes.

     The Company shall be entitled to make such adjustments in the Conversion
Price, in addition to those required by Section 609, as in its discretion shall
determine to be advisable in order that any stock dividends, subdivisions of
shares, distributions of rights to purchase stock or securities or distributions
of securities convertible into or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable to the recipient thereof.

     SECTION 612. Notice of Adjustment.

     Whenever the Conversion Price is adjusted, the Company shall promptly mail
to Holders a notice of the adjustment and file with the Trustee an Officers'
Certificate specifying the adjusted Conversion Price, and briefly stating the
facts requiring the adjustment and the manner of computing it.

     SECTION 613. Notice of Certain Transactions.

     In the event that:

     (1) the Company takes any action which would require an adjustment in the
Conversion Price,

     (2) the Company takes any action that requires a supplemental indenture
pursuant to Section 614, or

     (3) there is a dissolution or liquidation of the Company,

                                       24

<PAGE>

the Company shall mail to Holders and file with the Trustee a notice stating the
proposed record or effective date, as the case may be. The Company shall mail
the notice at least fifteen days before such date. Failure to mail such notice
or any defect therein shall not affect the validity of any transaction referred
to in clause (1), (2) or (3) of this Section 613.

     SECTION 614. Effect of Reclassification, Consolidation, Merger or Sale on
Conversion Privilege.

     If any of the following shall occur, namely: (a) any reclassification or
change of shares of Common Stock issuable upon conversion of the Notes (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination); (b) any
consolidation or merger in which the Company is a party consolidating with
another entity or merging with or into another entity other than a merger in
which the Company is the continuing corporation and which does not result in any
reclassification of, or change (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination) in, Outstanding shares of Common Stock; or (c) any
sale or conveyance of all or substantially all of the property and assets of the
Company to any Person, then the Company, or such successor, purchasing or
transferee corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale or conveyance,
execute and deliver to the Trustee a supplemental indenture providing that the
Holder of each Note then Outstanding shall have the right to convert such Note
into the kind and amount of shares of stock and other securities and property
(including cash) receivable upon such reclassification, change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
deliverable upon conversion of such Note immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Such
supplemental indenture shall provide for adjustments of the Conversion Price
which shall be as nearly equivalent as may be practicable to the adjustments of
the Conversion Price provided for in this Article. If, in the case of any such
consolidation, merger, sale or conveyance, the stock or other securities and
property (including cash) receivable thereupon by a holder of Common Stock
include shares of stock or other securities and property of a Person other than
the successor, purchasing or transferee corporation, as the case may be, in such
consolidation, merger, sale or conveyance, then such supplemental indenture
shall also be executed by such other Person and shall contain such additional
provisions to protect the interests of the Holders of the Notes as the Board of
Directors shall reasonably consider necessary by reason of the foregoing. The
provisions of this Section 614 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales or conveyances.

     In the event the Company shall execute a supplemental indenture pursuant to
this Section 614, the Company shall promptly file with the Trustee (x) an
Officers' Certificate briefly stating the reasons therefor, the kind or amount
of shares of stock or other securities or property (including cash) receivable
by Holders of the Notes upon the

                                       25

<PAGE>

conversion of their Notes after any such reclassification, change,
consolidation, merger, sale or conveyance, any adjustment to be made with
respect thereto and that all conditions precedent have been complied with and
(y) an Opinion of Counsel that all conditions precedent have been complied with,
and shall promptly mail notice thereof to all Holders.

     SECTION 615. Trustee's Disclaimer.

     The Trustee shall have no duty to determine when an adjustment under this
Article should be made, how it should be made or what such adjustment should be,
but may accept as conclusive evidence of that fact or the correctness of any
such adjustment, and shall be protected in relying upon, an Officers'
Certificate including the Officers' Certificate with respect thereto which the
Company is obligated to file with the Trustee pursuant to Section 612. The
Trustee makes no representation as to the validity or value of any securities or
assets issued upon conversion of Notes, and the Trustee shall not be responsible
for the Company's failure to comply with any provisions of this Article.

     The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 614, but may accept as conclusive evidence of the
correctness thereof, and shall be fully protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 614.

     SECTION 616. Voluntary Decrease.

     The Company may decrease the Conversion Price for any period of at least 20
days, upon at least 15 days notice, if the Board of Directors determines that
such decrease would be in the Company's best interests. Such determination by
the Board of Directors shall be conclusive.]

                                 [ARTICLE SEVEN

                    PURCHASE OF NOTES AT OPTION OF THE HOLDER

     SECTION 701. General.

     The Company shall be required to purchase Notes in accordance with this
Article Seven.

     On each Purchase Date, the Company shall repurchase, at the option of the
Holder, the Notes in respect of which such Holder has provided and not withdrawn
a Purchase Notice at the Purchase Price upon:

     (1) delivery to the Paying Agent, by the Holder of a written notice of
purchase (a "Purchase Notice") at any time from the opening of business on the
date that is 20

                                       26

<PAGE>

Business Days prior to a Purchase Date until the close of business on the
Business Day immediately preceding such Purchase Date stating:

          (A) if a Certificated Security has been issued, the certificate number
of the Note which the Holder shall deliver to be purchased or if a Certificated
Security has not been issued, such information as may be required by Applicable
Procedures;

          (B) the portion of the principal amount of Notes to be purchased,
which must be $1,000 or an integral multiple of $1,000;

          (C) that such Note shall be purchased as of the Purchase Date pursuant
to the terms and conditions specified in the Notes and in the Indenture as
supplemented by this Supplemental Indenture; and

          (D) in the event that the Company elects, pursuant to Section 702
hereof, to pay the Purchase Price to be paid as of such Purchase Date, in whole
or in part, in Common Stock but such portion of the Purchase Price shall
ultimately be payable to such Holder entirely in cash because any of the
conditions to payment of the Purchase Price in Common Stock is not satisfied
prior to the close of business on such Purchase Date, as set forth in Section
704 hereof, whether such Holder elects (i) to withdraw such Purchase Notice as
to some or all of the Notes to which such Purchase Notice relates (stating the
principal amount and certificate numbers of the Notes as to which such
withdrawal shall relate), or (ii) to receive cash in respect of the entire
Purchase Price for all Notes (or portions thereof) to which such Purchase Price
relates; and

     (2) delivery of such Notes to the Paying Agent at any time from the opening
of business on the date that is 20 Business Days prior to the Purchase Date
until the close of business on the Business Day immediately preceding such
Purchase Date (together with all necessary endorsements) at the offices of the
Paying Agent, such delivery being a condition to receipt by the Holder of the
Purchase Price therefor; provided, however, that such Purchase Price shall be so
paid pursuant to this Article only if the Notes so delivered to the Paying Agent
shall conform in all respects to the description thereof in the related Purchase
Notice.

     If a Holder, in such Holder's Purchase Notice and in any written notice of
withdrawal delivered by such Holder pursuant to the terms of Section 709 hereof,
fails to indicate such Holder's choice with respect to the election set forth in
clause (D) of Section 701(1), such Holder shall be deemed to have elected to
receive cash in respect of the Purchase Price for all Notes subject to the
Purchase Notice in the circumstances set forth in such clause (D).

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

                                       27

<PAGE>

     Any purchase by the Company contemplated pursuant to the provisions of this
Article shall be consummated by the delivery of the consideration to be received
by the Holder (if any) promptly following the later of the Purchase Date and the
time of delivery of the Note.

     Notwithstanding anything herein to the contrary, any Holder delivering to
the Paying Agent the Purchase Notice contemplated by this Section 701 shall have
the right to withdraw such Purchase Notice at any time prior to the close of
business on the Business Day immediately preceding the Purchase Date by delivery
of a written notice of withdrawal to the Paying Agent in accordance with Section
709.

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

     SECTION 702. The Company's Right to Elect Manner of Payment of Purchase
Price.

     The Purchase Price of Notes in respect of which a Purchase Notice pursuant
to Section 701 has been given, or a specified percentage thereof, shall be paid
by the Company, at the election of the Company, with cash or Common Stock or in
any combination of cash and Common Stock, subject to the conditions set forth in
Section 702 and 703 hereof. The Company shall specify, in the Company Notice
delivered pursuant to Section 705 hereof, whether the Company will purchase the
Notes for cash or Common Stock, or, if a combination thereof, the percentages of
the Purchase Price of Notes in respect of which it shall pay in cash and Common
Stock; provided, however, that the Company shall pay cash for fractional
interests in Common Stock. For purposes of determining the existence of
potential fractional interests, all Notes subject to purchase by the Company
held by a Holder shall be considered together (no matter how many separate
certificates are to be presented). Each Holder whose Notes are purchased
pursuant to this Article shall receive the same percentage of cash or Common
Stock in payment of the Purchase Price for such Notes, except (i) as provided in
Section 704 with regard to the payment of cash in lieu of fractional shares of
Common Stock and (ii) in the event that the Company is unable to purchase the
Notes of a Holder or Holders for Common Stock because any necessary
qualifications or registrations of the Common Stock under applicable state
securities laws cannot be obtained, the Company may purchase the Notes of such
Holder or Holders for cash. The Company may not change its election with respect
to the consideration (or components or percentages of components thereof) to be
paid once the Company has given its Company Notice to Holders except pursuant to
Section 704 in the event of a failure to satisfy, prior to the close of business
on the Purchase Date, any condition to the payment of the Purchase Price, in
whole or in part, in Common Stock.

     At least three Business Days before the Company Notice Date, the Company
shall deliver an Officers' Certificate to the Trustee specifying:

     (i) the manner of payment selected by the Company;

                                       28

<PAGE>

     (ii) the information required by Section 705;

     (iii) if the Company elects to pay the Purchase Price, or a specified
percentage thereof, in Common Stock, that the conditions to such manner of
payment set forth in Section 704 have been or shall be complied with; and

     (iv) whether the Company desires the Trustee to give the Company Notice
required by Section 705.

     SECTION 703. Purchase with Cash.

     On each Purchase Date, at the option of the Company, the Purchase Price of
Notes in respect of which a Purchase Notice pursuant to Section 701 has been
given, or a specified percentage thereof, may be paid by the Company with cash
equal to the aggregate Purchase Price of such Notes.

     SECTION 704. Payment by Issuance of Common Stock.

     On each Purchase Date, at the option of the Company, the Purchase Price of
Notes in respect of which a Purchase Notice pursuant to Section 701 has been
given, or a specified percentage thereof, may be paid by the Company by the
issuance of a number of shares of Common Stock equal to the quotient obtained by
dividing (i) the amount of cash to which the Holders would have been entitled
had the Company elected to pay all or such specified percentage, as the case may
be, of the Purchase Price of such Notes in cash by (ii) 95% of the Market Price
of a share of Common Stock, subject to the next succeeding paragraph.

     The Company will not issue a fractional share of Common Stock in payment of
the Purchase Price. Instead the Company will pay cash for the current market
value of the fractional share. The current market value of a fraction of a share
of Common Stock shall be determined by multiplying the Market Price by such
fraction and rounding the product to the nearest whole cent with one half cent
being rounded upwards. It is understood that if a Holder elects to have more
than one Note purchased, the number of shares of Common Stock shall be based on
the aggregate amount of Notes to be purchased.

     Upon determination of the actual number of shares of Common Stock issuable
in accordance with the provisions of this Section 704, the Company shall publish
such information in The Wall Street Journal or another daily newspaper of
national circulation.

     The Company's right to exercise its election to purchase the Notes pursuant
to this Article through the issuance of Common Stock shall be conditioned upon:

          (1) the Company not having given its Company Notice of an election to
pay entirely in cash and timely having given its Company Notice of an election
to

                                       29

<PAGE>

purchase all or a specified percentage of the Notes with Common Stock as
provided herein;

          (2) the listing of shares of Common Stock on the principal United
States securities exchange on which the Common Stock is then listed;

          (3) the registration of the shares of Common Stock to be issued in
respect of the payment of the Purchase Price under the Securities Act and the
Exchange Act, in each case, if required for the initial issuance thereof; and

          (4) any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such qualification and
registration.

     If the foregoing conditions are not satisfied with respect to a Holder or
Holders prior to the close of business on the Purchase Date and the Company has
elected to purchase the Notes pursuant to this Article through the issuance of
Common Stock, the Company shall pay, without further notice, the entire Purchase
Price of the Notes of such Holder or Holders in cash.

     The "Market Price" means the average of the Sale Prices of the Common Stock
for the twenty Trading Day period ending on the third Business Day (if the third
Business Day prior to the applicable Purchase Date is a Trading Day, or if not,
then on the last Trading Day prior to the third Business Day) prior to the
applicable Purchase Date appropriately adjusted to take into account the
occurrence, during the period commencing on the first of such Trading Days
during such five Trading Day period and ending on such Purchase Date, of any
event described in Section 609; subject, however, to the conditions set forth in
Sections 609(f) and 610.

     The "Sale Price" of the Common Stock on any date means the closing per
share sale price (or, if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and average ask prices) on such date as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is traded or, if the Common Stock is not listed on a United States
national or regional securities exchange, as reported by the National Quotation
Bureau Incorporated.

     SECTION 705. Notice of Election.

     The Company shall provide notice (a "Company Notice") on a date not less
than 20 Business Days prior to each Purchase Date (the "Company Notice Date") to
all Holders at their addresses shown in the register of the Security Registrar,
and to beneficial owners as required by applicable law, stating:

     (1) whether the purchase price is payable in cash or Common Stock or in any
combination thereof, specifying the percentages of each;

                                       30

<PAGE>

     (2) if the Company has elected to pay the Purchase Price in Common Stock:

          (A) that each Holder shall receive Common Stock with a Market Price
equal to such specified percentage of the Purchase Price of the Notes held by
such Holder (except any cash amount to be paid in lieu of fractional shares);

          (B) the method of calculating the Market Price of the Common Stock;
and

          (C) that because the Market Price of Common Stock will be determined
prior to the Purchase Date, Holders will bear the market risk with respect to
the value of the Common Stock to be received from the date such Market Price is
determined to the Purchase Date.

     In any case, each Company Notice shall include a form of Purchase Notice to
be completed by a Holder and shall state:

     (A) the Purchase Price, the Conversion Rate and, to the extent known at the
time of such notice the amount of interest that will be accrued and payable with
respect to the Notes as of the Purchase Date;

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

     (C) that Notes as to which a Purchase Notice has been given may be
converted pursuant to Article Six hereof only if the applicable Purchase Notice
has been withdrawn in accordance with the terms of this Supplemental Indenture;

     (D) that Notes must be surrendered to the Paying Agent to collect payment
of the Purchase Price;

     (E) that the Purchase Price for any Note as to which a Purchase Notice has
been given and not withdrawn shall be paid promptly following the later of the
Purchase Date and the time of surrender of such Note as described in (D);

     (F) the procedures the Holder must follow to exercise purchase rights under
this Article and a brief description of those rights;

     (G) a brief description of the conversion rights of the Notes; and

     (H) the procedures for withdrawing a Purchase Notice (including, without
limitation, for a conditional withdrawal pursuant to the terms of Section 701 or
709).

     If any of the Notes is in the form of a Global Note, then the Company shall
modify the Company Notice to the extent necessary to accord with the Applicable
Procedures.

                                       31

<PAGE>

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

     SECTION 706. Covenants of the Company.

     All Common Stock delivered upon purchase of the Notes shall be newly issued
shares or treasury shares, shall be duly authorized, validly issued, fully paid
and nonassessable and shall be free from preemptive rights and free of any Lien
or adverse claim.

     SECTION 707. Procedure upon Purchase.

     As soon as practicable after the Purchase Date, the Company shall deliver
to each Holder entitled to receive Common Stock through the Paying Agent, a
certificate for the number of full shares of Common Stock issuable in payment of
the Purchase Price and cash in lieu of any fractional shares of Common Stock.
The Person in whose name the certificate for Common Stock is registered shall be
treated as a holder of record of Common Stock on the Business Day following the
Purchase Date. No payment or adjustment shall be made for dividends on the
Common Stock the record date for which occurred on or prior to the Purchase
Date.

     SECTION 708. Taxes.

     If a Holder of a Note is paid in Common Stock, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on such issue of Common
Stock. However, the Holder shall pay any such tax which is due because the
Holder requests the Common Stock to be issued in a name other than the Holder's
name. The Paying Agent may refuse to deliver the certificates representing the
shares of Common Stock being issued in a name other than the Holder's name until
the Paying Agent receives a sum sufficient to pay any tax which will be due
because the shares of Common Stock are to be issued in a name other than the
Holder's name.

     SECTION 709. Effect of Purchase Notice.

     Upon receipt by the Paying Agent of the Purchase Notice specified in
Section 701, the Holder of the Note in respect of which such Purchase Notice was
given shall (unless such Purchase Notice is withdrawn as specified in the
following two paragraphs) thereafter be entitled to receive solely the Purchase
Price with respect to such Note. Such Purchase Price shall be paid to such
Holder, subject to receipt of funds and/or Common Stock by the Paying Agent,
promptly following the later of (x) the Purchase Date with respect to such Note
(provided the conditions in Section 701 have been satisfied) and (y) the time of
delivery of such Note to the Paying Agent by the Holder thereof in the manner
required by Section 701. Notes in respect of which a Purchase Notice has been
given by the Holder thereof may not be converted pursuant to Article Six hereof
on or

                                       32

<PAGE>

after the date of the delivery of such Purchase Notice unless such Purchase
Notice has first been validly withdrawn as specified in the following two
paragraphs.

     A Purchase Notice may be withdrawn by means of a written notice of
withdrawal delivered to the office of the Paying Agent in accordance with the
Purchase Notice at any time prior to the close of business on the Business Day
immediately preceding the applicable Purchase Date specifying:

     (1) if Certificated Securities have been issued, the certificate number of
the Notes in respect of which such notice of withdrawal is being submitted, or
if Certificated Securities have not been issued, such information as may be
required by the Applicable Procedures;

     (2) the principal amount of the Notes, in integral multiples of $1,000,
being withdrawn; and

     (3) the principal amount of such Notes that remains subject to the Purchase
Notice, if any.

     A written notice of withdrawal of a Purchase Notice may be in the form set
forth in the preceding paragraph or may be in the form of (i) a conditional
withdrawal contained in a Purchase Notice pursuant to the terms of Section
701(1)(D) or (ii) a conditional withdrawal containing the information set forth
in Section 701(l)(D) and the preceding paragraph and contained in a written
notice of withdrawal delivered to the Paying Agent as set forth in the preceding
paragraph.

     There shall be no purchase of any Notes pursuant to this Article (other
than through the issuance of Common Stock in payment of the Purchase Price,
including cash in lieu of fractional shares) if there has occurred (prior to, on
or after, as the case may be, the giving, by the Holders of such Notes, of the
required Purchase Notice) and is continuing an Event of Default (other than a
default in the payment of the Purchase Price with respect to such Notes). The
Paying Agent shall promptly return to the respective Holders thereof any Notes
(x) with respect to which a Purchase Notice has been withdrawn in compliance
with this Indenture, or (y) held by it during the continuance of an Event of
Default (other than a default in the payment of the Purchase Price with respect
to such Notes) in which case, upon such return, the Purchase Notice with respect
thereto shall be deemed to have been withdrawn.

     SECTION 710. Deposit of Purchase Price.

     Prior to 11:00 a.m. (New York City time) on the Purchase Date, the Company
shall deposit with the Trustee or with the Paying Agent an amount of cash (in
immediately available funds if deposited on such Business Day) and/or Common
Stock, if permitted hereunder, sufficient to pay the aggregate Purchase Price of
all of the Notes or portions thereof which are to be purchased as of the
Purchase Date. The manner in which the deposit required by this Section 710 is
made by the Company shall be at the

                                       33

<PAGE>

option of the Company, provided, however, that such deposit shall be made in a
manner such that the Trustee or a Paying Agent shall have immediately available
funds on the Purchase Date.

     If a Paying Agent holds, in accordance with the terms hereof, money and/or
Common Stock sufficient to pay the Purchase Price of any Note for which a
Purchase Notice has been tendered and not withdrawn in accordance with this
Indenture then, immediately after such Purchase Date, such Note shall cease to
be Outstanding and the rights of the Holder in respect thereof shall terminate
(other than the right to receive the Purchase Price as aforesaid).

     SECTION 711. Securities Purchased in Part.

     Any Note which is to be purchased only in part shall be surrendered at the
office of the Paying Agent (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company or the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing) and the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Note, without
service charge except for any taxes to be paid by the Holder in the event a Note
is registered under a new name, a new Note or Notes, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to,
and in exchange for, the portion of the principal amount of the Note so
surrendered which is not purchased.

     SECTION 712. Compliance with Securities Laws Upon Purchase of Securities.

     In connection with any offer to purchase or purchase of Notes under this
Article (provided that such offer or purchase constitutes an "issuer tender
offer" for purposes of Rule 13e-4 (which term, as used herein, includes any
successor provision thereto) under the Exchange Act at the time of such offer or
purchase), the Company shall (i) comply with Rule 13e-4 under the Exchange Act,
(ii) file the related Schedule TO (or any successor schedule, form or report),
if required, under the Exchange Act and (iii) otherwise comply with all
applicable federal and state securities laws so as to permit the rights and
obligations under Article Seven to be exercised in the time and in the manner
specified in this Article.

     SECTION 713. Repayment to the Company.

     The Trustee and the Paying Agent shall return to the Company any cash or
Common Stock that remain unclaimed for two years, subject to applicable
unclaimed property law, together with interest or dividends, if any, thereon
held by them for the payment of the Purchase Price, provided, however, that to
the extent that the aggregate amount of cash or Common Stock deposited by the
Company pursuant to Section 710 exceeds the aggregate Purchase Price of the
Notes or portions thereof which the Company is obligated to purchase as of the
Purchase Date, then promptly after the Business Day following the Purchase Date,
the Trustee shall return any such excess to the

                                       34

<PAGE>

Company together with interest or dividends, if any, thereon. Thereafter, any
Holder entitled to payment must look to the Company for payment as general
creditors, unless an applicable abandoned property law designates another
Person.]

                                 [ARTICLE EIGHT

                         PURCHASE OF NOTES AT OPTION OF
                       THE HOLDER UPON FUNDAMENTAL CHANGE

     SECTION 801. Right to Require Purchase.

     (a) If a Fundamental Change occurs, Holders shall have the right, at their
option, to require the Company to Purchase all of such Holder's Notes not
previously called for redemption, or any portion of the principal amount
thereof, that is equal to $1,000 or an integral multiple of $1,000, on the
Fundamental Change Purchase Date.

     A "Fundamental Change" shall be deemed to have occurred at such time as (a)
any Person, including its Affiliates and associates, other than Permitted
Holders, files a Schedule 13D or TO (or any successor schedule, form or report
under the Exchange Act) disclosing that such Person has become the Beneficial
Owner of 50% or more of the total voting power in the aggregate of all classes
the Company's Capital Stock then outstanding normally entitled to vote in
elections of the Board of Directors, (b) there shall be consummated any
consolidation or merger of the Company pursuant to which the Common Stock would
converted into cash, securities or other property, in each case other than a
consolidation or merger of the Company in which the holders of Common Stock
immediately prior to the consolidation or merger have, directly or indirectly,
at least a majority of the total voting power in the aggregate of all classes of
Capital Stock of the continuing or surviving corporation normally entitled to
vote in elections of directors immediately after the consolidation or merger or
(c) the Company shall sell, convey, transfer or lease all or substantially all
of its properties and assets to any Person other than a Permitted Holder.

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

     The term "Permitted Holders" shall mean [(a) the Company and its
Subsidiaries and employee benefit plans, (b) any "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act) that includes                ;
provided that             at all times (i) holds the position of director of the
Company, or another position of equal or greater responsibilities, and the
estates, executors and administrators, and parents and lineal descendants of
                 , and the estates, executors and administrators of any of such
parents and lineal descendants and (c) any corporation, partnership, limited
liability company, trust or other entity in which the trusts, individuals

                                       35

<PAGE>

or lineal descendents referred to in clause (b) in the aggregate have either a
direct or indirect beneficial interest or voting control of greater than 50%.]

     (b) Within fifteen Business Days following any Fundamental Change, the
Company shall provide a notice to all Holders at their addresses shown in the
register of the Security Registrar, and to beneficial owners as required by
applicable law, and the Trustee offering to purchase the Notes on a certain date
(which date shall not be later than 35 Business Days from the date of such
notice) (the "Fundamental Change Purchase Date") specified in such notice and
such notice shall state:

          (1) the events giving rise to the Fundamental Change;

          (2) the date of such Fundamental Change;

          (3) the date by which the Fundamental Change Purchase Notice pursuant
to this Section 801 must be given;

          (4) the Fundamental Change Purchase Date;

          (5) the Fundamental Change Purchase Price that will be accrued and
payable with respect to the Notes as of the Fundamental Change Purchase Date;

          (6) briefly, the conversion rights of the Notes;

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

          (8) the Conversion Price and any adjustments thereto;

          (9) that Notes as to which a Fundamental Change Purchase Notice has
been given may be converted into Common Stock pursuant to Article Six only to
the extent that the Fundamental Change Purchase Notice has been withdrawn in
accordance with the terms of this Indenture;

          (10) the procedures that the Holder must follow to exercise rights
under this Section 801;

          (11) the procedures for withdrawing a Fundamental Change Purchase
Notice, including a form of notice of withdrawal; and

          (12) that the Holder must satisfy the requirements set forth in the
Notes in order to convert the Notes.

     If any of the Notes are in the form of a Global Note, then the Company
shall modify such notice to the extent required by the Applicable Procedures.

                                       36

<PAGE>

     (c) A Holder may exercise its rights specified in subsection (a) of this
Section 801 upon delivery of a written notice (which shall be in substantially
the form included as an attachment to the Notes and which may be delivered by
letter, overnight courier, hand delivery, facsimile transmission or in any other
written form and, in the case of Global Notes, may be delivered electronically
or by other means in accordance with the Depository's customary procedures) of
the exercise of such rights (a "Fundamental Change Purchase Notice") to any
Paying Agent for receipt by such Paying Agent no later than the close of
business on the fifth Business Day next preceding the Fundamental Change
Purchase Date.

     The delivery of such Note to any Paying Agent (together with all necessary
endorsements) at the office of such Paying Agent shall be a condition to the
receipt by the Holder of the Fundamental Change Purchase Price.

     The Company shall purchase from the Holder thereof, pursuant to this
Section 801, a portion of a Note if the principal amount of such portion is
$1,000 or an integral multiple of $1,000. Provisions of this Supplemental
Indenture that apply to the purchase of all of a Note pursuant to Sections 801
through 806 also apply to the purchase of such portion of such Note.

     Any purchase by the Company contemplated pursuant to the provisions of this
Section 801 shall be consummated by the delivery of the consideration to be
received by the Holder promptly following the later of the Fundamental Change
Purchase Date and the time of delivery of the Note to the Paying Agent in
accordance with this Section 801.

     Notwithstanding anything herein to the contrary, any Holder delivering to a
Paying Agent the Fundamental Change Purchase Notice contemplated by this
subsection (c) shall have the right to withdraw such Fundamental Change Purchase
Notice in whole or as to a portion thereof that is a principal amount of $1,000
or an integral multiple thereof at any time prior to the close of business on
the Business Day next preceding the Fundamental Change Purchase Date by delivery
of a written notice of withdrawal to the Paying Agent in accordance with Section
802.

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

     In the case of Global Notes, any Fundamental Change Purchase Notice may be
delivered or withdrawn and such Notes may be surrendered or delivered for
purchase in accordance with the Applicable Procedures.

     (d) Anything herein to the contrary notwithstanding, the Company shall not
be required to effect a Fundamental Change Offer following a Fundamental Change
if a third party makes the Fundamental Change Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in this Article and
purchases all of the Notes validly tendered and not withdrawn under such
Fundamental Change Offer.

                                       37

<PAGE>

     SECTION 802. Effect of Fundamental Change Purchase Notice.

     Upon receipt by any Paying Agent of the Fundamental Change Purchase Notice
specified in Section 801(c), the Holder of the Note in respect of which such
Fundamental Change Purchase Notice was given shall (unless such Fundamental
Change Purchase Notice is withdrawn as specified below) thereafter be entitled
to receive on the Fundamental Change Purchase Date the Fundamental Change
Purchase Price with respect to such Note together with interest accrued to such
Fundamental Change Purchase Date. Such Fundamental Change Purchase Price shall
be paid to such Holder promptly following the later of (a) the Fundamental
Change Purchase Date with respect to such Note (provided the conditions in
Section 801(c) have been satisfied) and (b) the time of delivery of such Note to
a Paying Agent by the Holder thereof in the manner required by Section 801(c).
Notes in respect of which a Fundamental Change Purchase Notice has been given by
the Holder thereof may not be converted into Common Stock on or after the date
of the delivery of such Fundamental Change Purchase Notice unless such
Fundamental Change Purchase Notice has first been validly withdrawn as specified
in the following paragraph.

     A Fundamental Change Purchase Notice may be withdrawn by means of a written
notice of withdrawal delivered to the office of the Paying Agent in accordance
with the Fundamental Change Purchase Notice at any time prior to the close of
business on the Business Day immediately preceding the Fundamental Change
Purchase Date specifying:

     (1) if a Certificated Security has been issued, the certificate number of
the Notes in respect of which such notice of withdrawal is being submitted, or
if a Certificated Security has not been issued, such information as may be
required by Applicable Procedures;

     (2) the principal amount, in integral multiples of $1,000, of the Notes
being withdrawn; and

     (3) the principal amount of such Notes which remain subject to the
Fundamental Change Purchase Notice, if any.

     SECTION 803. Deposit of Fundamental Change Purchase Price.

     On the Fundamental Change Purchase Date, the Company shall, to the extent
lawful accept for payment all the Notes or portions thereof properly tendered
pursuant to the Fundamental Change Offer and deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate,
stating the aggregate principal amount of Notes or portions thereof being
purchased.

     On or before 11:00 a.m., New York City time, on the Fundamental Change
Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent
(other than the Company or an Affiliate of the Company) an amount of money (in
immediately available funds if deposited on such Business Day) sufficient to pay
the aggregate

                                       38

<PAGE>

Fundamental Change Purchase Price of all the Notes or portions thereof that are
to be purchased as of such Fundamental Change Purchase Date. The manner in which
the deposit required by this Section 803 is made by the Company shall be at the
option of the Company; provided, however, that such deposit shall be made in a
manner such that the Trustee or a Paying Agent shall have immediately available
funds on the Fundamental Change Purchase Date.

     If a Paying Agent holds, in accordance with the terms hereof, funds
sufficient to pay the Fundamental Change Purchase Price of any Note for which a
Fundamental Change Purchase Notice has been tendered and not withdrawn in
accordance with this Supplemental Indenture then, on the Fundamental Change
Purchase Date such Note shall cease to be Outstanding and the rights of the
Holder in respect thereof shall terminate (other than the right to receive the
Fundamental Change Purchase Price). The Company shall publicly announce the
principal amount of Notes purchased as a result of such Fundamental Change on or
as soon as practicable after the Fundamental Change Purchase Date.

     SECTION 804. Securities Purchased In Part.

     Any Note that is to be purchased only in part shall be surrendered at the
office of a Paying Agent and promptly after the Fundamental Change Purchase Date
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Note, without service charge (other than amounts to be paid in
respect of applicable transfer taxes), a new Note or Notes, of such authorized
denomination or denominations in integral multiples of $1,000 as may be
requested by such Holder, in aggregate principal amount equal to, and in
exchange for, the portion of the principal amount of the Note so surrendered
that is not purchased.

     SECTION 805. Compliance With Securities Laws Upon Purchase of Securities.

     In connection with any offer to purchase or purchase of Notes under this
Article (provided that such offer or purchase constitutes an "issuer tender
offer" for purposes of Rule 13e-4 (which term, as used herein, includes any
successor provision thereto) under the Exchange Act at the time of such offer or
purchase), the Company shall (i) comply with Rule 13e-4 and Rule 14e-1 and any
other tender offer rules promulgated under the Exchange Act, (ii) file the
related Schedule TO (or any successor schedule, form or report), if required,
under the Exchange Act and (iii) otherwise comply with all applicable federal
and state securities laws so as to permit the rights and obligations under this
Article to be exercised in the time and in the manner specified in this Article.

     SECTION 806. Repayment to the Company.

     The Trustee and the Paying Agent shall return to the Company any cash or
Common Stock that remains unclaimed for two years, subject to applicable
unclaimed property law, together with interest or dividends, if any, thereon
held by them for the payment of the Fundamental Change Purchase Price; provided,
however, that to the

                                       39

<PAGE>

extent that the aggregate amount of cash or Common Stock deposited by the
Company pursuant to Section 603 exceeds the aggregate Fundamental Change
Purchase Price of the Notes or portions thereof which the Company is obligated
to purchase as of the Fundamental Change Purchase Date, then on the Business Day
following the Purchase Date, the Trustee shall return any such excess to the
Company together with interest or dividends, if any, thereon. Thereafter, any
Holder entitled to payment must look to the Company for payment as general
creditors, unless an applicable abandoned property law designates another
Person.]

                                  ARTICLE NINE

                            MISCELLANEOUS PROVISIONS

     The Trustee makes no undertaking or representations in respect of, and
shall not be responsible in any manner whatsoever for and in respect of, the
validity or sufficiency of this Supplemental Indenture or the proper
authorization or the due execution hereof by the Company or for or in respect of
the recitals and statements contained herein, all of which recitals and
statements are made solely by the Company.

     Except as expressly amended hereby, the Original Indenture shall continue
in full force and effect in accordance with the provisions thereof and the
Original Indenture is in all respects hereby ratified and confirmed. This
Supplemental Indenture and all its provisions shall be deemed a part of the
Original Indenture in the manner and to the extent herein and therein provided.

     This Supplemental Indenture shall be governed by, and construed in
accordance with, the laws of the State of New York.

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

     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the day and year first above written.

                                        DTE ENERGY COMPANY

                                        By: ____________________________________
                                        Name:
                                        Title:

                                       40

<PAGE>

ATTEST:

By: _________________________________
Name:
Title:

                                        BNY MIDWEST TRUST COMPANY

                                        By: ____________________________________
                                        Name:
                                        Title:

                                       41

<PAGE>

                                                                       EXHIBIT A

                               FORM OF SENIOR NOTE

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TRUST COMPANY ("DTC"), TO A NOMINEE OF DTC OR BY DTC OR ANY SUCH
NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH SUCCESSOR. UNLESS THIS NOTE
IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO., OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.,
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL, INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

CUSIP NO.: _______________                                         $____________
NO. R-___

                               DTE ENERGY COMPANY
                      SERIES             % SENIOR NOTES DUE

DTE ENERGY COMPANY, a corporation duly organized and existing under the laws of
the State of Michigan (herein referred to as the "Company", which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of ______________________________________________ ($_____________)
on               ("Stated Maturity" with respect to the principal of this Note)
[, unless previously redeemed,] [and to pay interest at the rate of         %
per annum on said principal sum from the date of issuance or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for until the principal of this Note becomes due and payable, and on any overdue
principal and premium and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum during such overdue period. Interest on this Note will be
payable [semiannually] [quarterly] in arrears on               [,             ,
             ] and               of each year (each such date, an "Interest
Payment Date"), commencing              .]

                                       A-1

<PAGE>

[If this Note is not to bear interest prior to Stated Maturity, insert] [The
principal of this Note shall not bear interest except in the case of a default
in payment of principal upon acceleration, upon redemption or at Stated Maturity
and in such case the overdue principal and any overdue premium shall bear
interest at the rate of [yield to maturity]% per annum (to the extent that the
payment of such interest shall be legally enforceable), which shall accrue from
the date of such default in payment to the date payment of such principal has
been made or duly provided for. Interest on any overdue principal or premium
shall be payable on demand. Any such interest on any overdue principal or
premium that is not so paid on demand shall bear interest at the rate of [yield
to maturity] % per annum (to the extent that the payment of such interest shall
be legally enforceable), which shall accrue from the date of such demand for
payment to the date payment of such interest has been made or duly provided for,
and such interest shall also be payable on demand.]

[The amount of interest payable for any period shall be computed on the basis of
[twelve 30-day months and a 360-day year] [a 360-day year and the actual number
of days elapsed in such period] [the actual number of days in the year] and, for
any period shorter than a full [semiannual] [quarterly] interest period, will be
computed on the basis of the actual number of days elapsed in such period. In
the event that any Interest Payment Date, redemption date or other date of
Maturity of the Notes is not a Business Day, then payment of the amount payable
on such date will be made on the next succeeding day which is a Business Day
[(and without any interest or other payment in respect of any such delay),]
[except that, if such Business Day is in the next succeeding calendar [year]
[month], such payment shall be made on the immediately preceding Business Day
[without reduction in the amount due to such early payment], in each case with
the same force and effect as if made on such date.] A "Business Day" shall mean
each day other than a Saturday or a Sunday or a day on which commercial banks in
The City of New York are authorized or obligated by or pursuant to law or
executive order to be closed. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date with respect
to this Note will, as provided in the Indenture (as defined herein), be paid to
the person in whose name this Note (or one or more Predecessor Securities, as
defined in said Indenture) is registered at the close of business on the
relevant record date for such interest installment, which shall be the
[fifteenth calendar day (whether or not a Business Day)] prior to the relevant
Interest Payment Date (the "Regular Record Date"). Any such interest installment
not punctually paid or duly provided for shall forthwith cease to be payable to
the registered Holders on such Regular Record Date, and may either be paid to
the person in whose name this Note (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof shall be
given to the registered Holders of this series of Notes not less than ten days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture. The principal of [,
and premium, if any,] and the interest on this Note shall be payable at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, in any coin or currency of

                                       A-2

<PAGE>

the United States of America which at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of interest
may be made at the option of the Company by check mailed to the registered
Holder at the close of business on the Regular Record Date at such address as
shall appear in the Security Register.] Notwithstanding anything else contained
herein, if this Note is a Global Note and is held in book-entry form through the
facilities of the Depositary, payments on this Note will be made to the
Depositary or its nominee in accordance with arrangements then in effect between
the Trustee and the Depositary.

This Note is one of a duly authorized series of Securities of the Company,
designated as the "          Series           % Senior Notes due          " (the
"Notes"), initially limited to an aggregate principal amount of $
(except for Notes authenticated and delivered upon transfer of, or in exchange
for, or in lieu of other Notes, and except as further provided in the
Indenture), all issued or to be issued under and pursuant to an Amended and
Restated Indenture, dated as of April 9, 2001, as supplemented through and
including the Supplemental Indenture dated as of                  , with respect
to the Notes (the "Supplemental Indenture"), as further amended, supplemented or
modified from time to time (the "Indenture"), duly executed and delivered
between the Company and BNY Midwest Trust Company, an Illinois trust company, as
Trustee (herein referred to as the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture reference is hereby made for a
description of the respective rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the registered Holders
of the Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered.

[[Except as provided below,] This Note is not subject to repayment at the option
of the Holder hereof.] [[Except as provided below,] [T][t]his Note is not
redeemable by the Company prior to maturity and is not subject to any sinking
fund.]

This Note will be redeemable at the option of the Company, in whole at any time
or in part from time to time (any such date of optional redemption, an "Optional
Redemption Date," which shall be a "Redemption Date" for purposes of the
Indenture), at an optional redemption price (which shall be a "Redemption Price"
for purposes of the Indenture) equal to [100% of the principal amount redeemed
plus the accrued and unpaid interest thereon to the date fixed for redemption]
[the greater of (i) 100% of the principal amount of this Note to be redeemed and
(ii) the sum of the present values of the principal amount of this Note to be
redeemed and the remaining scheduled payments of interest on the principal
amount of this Note to be redeemed (exclusive of interest accrued to the related
Optional Redemption Date) until Stated Maturity, in each case discounted from
their respective scheduled payment dates to such Optional Redemption Date on a
semiannual basis (assuming a 360-day year consisting of 30-day months) at the
Adjusted Treasury Rate (as defined below) plus        basis points, plus in
either case, accrued interest thereon to the date of redemption.]

Notwithstanding the foregoing, installments of interest on this Note that are
due and payable on Interest Payment Dates falling on or prior to a Redemption
Date will be

                                       A-3

<PAGE>

payable on the Interest Payment Date to the registered Holders as of the close
of business on the relevant Record Date.

["Adjusted Treasury Rate" means, with respect to any Optional Redemption Date,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, calculated on the third Business Day preceding such
Optional Redemption Date, using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Optional Redemption Date.

"Comparable Treasury Issue" means the United States Treasury security determined
by the Reference Treasury Dealer as having a maturity comparable to the
remaining term of this Note that would be utilized, at the time of selection and
in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity with the remaining term of this
Note.

"Comparable Treasury Price" means, with respect to any Optional Redemption Date,
(i) the average of the Reference Treasury Dealer Quotations for such Optional
Redemption Date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (ii) if the Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such quotations, or
(iii) if only one Reference Treasury Dealer Quotation is received, such
quotation.

"Reference Treasury Dealer" means each of: (i)                     ,
                     and                      (or their respective affiliates
which are Primary Treasury Dealers), and their respective successors; provided,
however, that if any of the foregoing cease to be a primary U.S. Government
securities dealer in the United States (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer; and (ii) any
other Primary Treasury Dealer(s) selected by the Trustee after consultation with
the Company.

"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any Optional Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Optional Redemption Date.]

Notice of any optional redemption will be mailed at least 30 days but not more
than 60 days before the Optional Redemption Date to the Holder hereof at its
registered address.

Unless the Company defaults in payment of the applicable Redemption Price, on
and after the applicable Redemption Date interest will cease to accrue on the
principal amount of this Note called for redemption.

If money sufficient to pay the applicable Redemption Price with respect to the
principal amount of and accrued interest on the principal amount of this Note to
be redeemed on the applicable Redemption Date is deposited with the Trustee or
Paying Agent on or

                                       A-4

<PAGE>

before the related Redemption Date and certain other conditions are satisfied,
then on or after such Redemption Date, interest will cease to accrue on the
principal amount of this Note called for redemption. If the Notes are only
partially redeemed by the Company, the Trustee shall select which Notes are to
be redeemed by lot or in a manner it deems fair and appropriate in accordance
with the terms of the Indenture.

In the event of redemption of this Note in part only, a new Note or Notes of
this series for the unredeemed portion hereof will be issued in the name of the
registered Holder hereof upon the cancellation hereof.]

[The sinking fund for this series provides for the redemption on
in each year beginning with the year          and ending with the year
of [not less than]                              [("mandatory sinking fund") and,
at the option of the Company, not more than                          ] aggregate
principal amount of Notes of this series. [Notes of this series acquired or
redeemed by the Company otherwise than through [mandatory] sinking fund payments
may be credited against subsequent [mandatory] sinking fund payments otherwise
required to be made in the order in which they become due.]]

[If a Fundamental Change occurs, Holders of Notes shall have the right, at their
option, to require the Company to purchase all of such Holder's Notes not
previously called for redemption, or any portion of the principal amount
thereof, that is equal to $1,000 or an integral multiple of $1,000, pursuant to
a Fundamental Change Offer. The Company shall pay the Fundamental Change
Purchase Price in cash equal to 100% of the aggregate principal amount of the
Notes to be purchased.

Within 15 Business Days following any Fundamental Change, the Company shall
provide notice in accordance with the provisions of Section 801(b) of the
Supplemental Indenture.

To exercise its purchase right, Holders of Notes must deliver the form entitled
"Option of Holder to Elect Purchase," in the form attached hereto, so as to be
received by the Paying Agent no later than the close of business on the fifth
Business Day prior to the Fundamental Change Purchase Date. Any Purchase Notice
may be withdrawn by the Holder by a written notice provided in accordance with
the provisions of Section 802 of the Supplemental Indenture.

On the Fundamental Change Purchase Date, the Company shall, to the extent
lawful, accept for payment all the Notes or portions thereof properly tendered
pursuant to the Fundamental Change Offer, deposit with the Paying Agent an
amount equal to the Fundamental Change Purchase Price in respect of all the
Notes or portions thereof so tendered, and deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate,
stating the aggregate principal amount of Notes or portions thereof being
purchased.

The Company shall not be required to make a Fundamental Change Offer following a
Fundamental Change if a third party makes the Fundamental Change Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture

                                      A-5

<PAGE>

applicable to a Fundamental Change Offer made by the Company and purchases all
of the Notes validly tendered and not withdrawn under such Fundamental Change
Offer.

If cash sufficient to pay the Fundamental Change Purchase Price of all Notes or
portions thereof to be purchased as of the Fundamental Change Purchase Date is
deposited with the Paying Agent by 11:00 a.m. on the Fundamental Change Purchase
Date, all interest shall cease to accrue on such Notes (or portions thereof)
immediately after such Fundamental Change Purchase Date, and the Holder hereof
shall have no other rights as such (other than the right to receive the
Fundamental Change Purchase Price upon surrender of such Note).]

[The Holder of any Note shall have the right, exercisable at any time after the
Issue Date of the Notes and before the close of business on the Business Day
immediately preceding the date of Stated Maturity, to convert the principal
amount of the Notes (or any portion of it that is an integral multiple of
$1,000) into shares of Common Stock at the Conversion Price, subject to
adjustment as described below. The foregoing notwithstanding, if a Note is
called for redemption, such conversion right shall terminate at the close of
business on the Business Day immediately preceding the Redemption Date, unless
the Company defaults in making the payment due on the Redemption Date, in which
case the conversion right shall terminate at the close of business on the date
such default is cured and such payment is made.

A Note in respect of which a Holder has delivered a Purchase Notice or a
Fundamental Change Purchase Notice exercising the option of such Holder to
require the Company to purchase such Note may be converted only if such notice
of exercise is withdrawn in accordance with the terms of the Indenture. The
initial Conversion Price is $            per share of Common Stock, subject to
adjustment upon the occurrence of certain events described in the Indenture. The
shares of Common Stock shall be deliverable through the Conversion Agent to
Holders surrendering Notes as promptly as practicable but in any event no later
than the fifth Business Day following the Conversion Date. The Company shall
deliver cash or a check in lieu of any fractional share of Common Stock.

Except as provided in the next succeeding paragraph, on conversion of a Holder's
Notes, such Holder shall not receive any cash payment of interest. The Company's
delivery to a Holder of the full number of shares of Common Stock into which a
Note is convertible shall be deemed to satisfy the Company's obligation to pay
the principal amount at maturity of the Note and to satisfy the Company's
obligation to pay accrued interest attributable to the period from the most
recent Interest Payment Date through the Conversion Date.

If any Notes are converted during the period after any Regular Record Date but
before the next Interest Payment Date, interest on such Notes shall be paid on
the next Interest Payment Date, notwithstanding such conversion, to the Holder
of record on the Regular Record Date. Any Notes that are, however, delivered to
the Company for conversion after any Regular Record Date but before the next
Interest Payment Date must, except as described in the next sentence, be
accompanied by a payment equal to the interest

                                      A-6

<PAGE>

payable on such Interest Payment Date on the principal amount of Notes being
converted. The Company shall not require the payment to it described in the
preceding sentence if, during the period between a Regular Record Date and the
Interest Payment Date to which such Regular Record Date relates, a conversion
occurs prior to a Redemption Date falling during such period. No fractional
shares will be issued upon conversion, but a cash adjustment shall be made for
any fractional shares.

To convert a Note, a Holder must (a) complete and manually sign the form
entitled "Conversion Notice," in the form attached hereto, and deliver such
notice to the Conversion Agent, (b) surrender the Note to the Conversion Agent,
(c) furnish appropriate endorsements and transfer documents (including any
certification that may be required under applicable law) if required by the
Conversion Agent and (d) pay any transfer or similar tax, if required.]

[Subject to the terms and conditions of the Indenture, the Company shall become
obligated to purchase, at the option of the Holder, the Notes held by such
Holder on any                        in the years         ,         ,
and          at a Purchase Price equal to 100% of the principal amount thereof
plus accrued and unpaid interest to, but excluding, the Purchase Date, upon
delivery of a Purchase Notice containing the information set forth in the
Indenture, at any time from the opening of business on the date that is 20
Business Days prior to such Purchase Date until the close of business on the
Business Day immediately preceding such Purchase Date and upon delivery of the
Notes to the Paying Agent by the Holder as set forth in the Indenture.

The Purchase Price may be paid, at the option of the Company, in cash or by the
issuance of Common Stock (as provided in the Indenture), or in any combination
thereof.

Holders have the right to withdraw any Purchase Notice by delivering to the
Paying Agent a written notice of withdrawal prior to the close of business on
the Business Day immediately preceding the Purchase Date in accordance with the
provisions of Section 709 of the Supplemental Indenture.

If cash or securities sufficient to pay the Purchase Price of all Notes or
portions thereof to be purchased as of the Purchase Date is deposited with the
Paying Agent by 11:00 a.m. on the Purchase Date, all interest shall cease to
accrue on such Notes (or portions thereof) immediately after such Purchase Date,
and the Holder thereof shall have no other rights as such (other than the right
to receive the Purchase Price upon surrender of such Note).]

[In case an Event of Default, as defined in the Indenture, shall have occurred
and be continuing, the principal hereof may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.]

[Insert for Original Issue Discount Notes] [If an Event of Default with respect
to this Note shall occur and be continuing, an amount of principal of this Note
(the "Acceleration Amount") may be declared due and payable in the manner and
with the

                                      A-7

<PAGE>

effect provided in the Indenture. In case of a declaration of acceleration on or
before                       and on                        in any year, the
Acceleration Amount per                       principal amount at Stated
Maturity of this Note shall be equal to the amount set forth in respect of such
date below:

<TABLE>
<CAPTION>
                                 Acceleration Amount
Date of Acceleration   per principal amount of Stated Maturity
--------------------   ---------------------------------------
<S>                    <C>

</TABLE>

and in case of a declaration of acceleration on any other date, the Acceleration
Amount shall be equal to the Acceleration Amount as of the next preceding date
set forth in the table above, plus accrued original issue discount (computed in
accordance with the method used for calculating the amount of original issue
discount that accrues for U.S. Federal income tax purposes) from such next
preceding date to the date of declaration at the yield to maturity. For the
purpose of this computation the yield to maturity is         %. Upon payment (i)
of the Acceleration Amount so declared due and payable and (ii) of interest on
any overdue principal and overdue interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of and interest, if any,
on this Note shall terminate.]

The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Note upon compliance by the Company with certain conditions
set forth therein.

The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority of the aggregate principal amount of all Notes issued under the
Indenture at the time outstanding and affected thereby; provided, however, that
no such amendment shall without the consent of the Holder of each Note so
affected, among other things (i) change the stated maturity of the principal of,
or any installment of principal of or interest on any Notes of any series, or
reduce the principal amount thereof, or reduce the rate of interest thereon, or
reduce any premium payable upon the redemption thereof or (ii) reduce the
percentage of Notes, the Holders of which are required to consent to any
amendment or waiver or for certain other matters as set forth in the Indenture.
The Indenture also contains provisions permitting (i) the registered Holders of
at least 66 2/3% in aggregate principal amount of the Securities of each series
at the time outstanding affected thereby, on behalf of the registered Holders of
the Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and (ii) the registered Holders of not less than a
majority in aggregate principal amount of the Securities of any series at the
time outstanding affected thereby, on behalf of the registered Holders of the
Securities of such series, to waive certain past defaults under the Indenture
and their consequences. Any such consent or

                                      A-8

<PAGE>

waiver by the registered Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such registered Holder and upon
all future registered Holders and owners of this Note and of any Note issued in
exchange hereof or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Note.

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 premium, if any,] and interest
on this Note at the time and place and at the rate and in the coin or currency
herein prescribed.

As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note is registrable in the Security Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company in any place where the principal of and any interest on
this Note are payable or at such other offices or agencies as the Company may
designate, duly endorsed by or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Security
Registrar or any transfer agent duly executed by the registered Holder hereof or
his or her attorney duly authorized in writing, and thereupon one or more new
Notes of this series and of like tenor, of authorized denominations and for the
same aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.

Prior to due presentment for registration of transfer of this Note, the Company,
the Trustee, any paying agent and any Security Registrar may deem and treat the
registered Holder hereof as the absolute owner hereof (whether or not this Note
shall be overdue and notwithstanding any notice of ownership or writing hereon
made by anyone other than the Security Registrar) for the purpose of receiving
payment of or on account of the principal hereof and interest due hereon and for
all other purposes, and neither the Company nor the Trustee nor any paying agent
nor any Security Registrar shall be affected by any notice to the contrary.

The Notes of this series are issuable only in fully registered form without
coupons in denominations of $1,000 and any integral multiple thereof. This
Global Note is exchangeable for Notes in definitive form only under certain
limited circumstances set forth in the Indenture. Notes of this series so issued
are issuable only in registered form without coupons in denominations of $1,000
and any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Notes of this series are exchangeable for
a like aggregate principal amount of Notes of this series of a different
authorized denomination, as requested by the registered Holder surrendering the
same.

As set forth in, and subject to the provisions of, the Indenture, no registered
owner of any Note will have any right to institute any proceeding with respect
to the Indenture or for

                                      A-9

<PAGE>

any remedy thereunder, unless (i) such registered owner shall have previously
given to the Trustee written notice of a continuing Event of Default with
respect to the Notes of this series, (ii) the registered owners of not less than
25% in principal amount of the outstanding Notes of this series shall have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as trustee, (iii) the Trustee shall have failed to institute
such proceeding within 60 days and (iv) the Trustee shall not have received from
the registered owners of a majority in principal amount of the outstanding Notes
of this series a direction inconsistent with such request within such 60-day
period; provided, however, that such limitations do not apply to a suit
instituted by the registered owner hereof for the enforcement of payment of the
principal of or premium, if any, or any interest on this Note on or after the
respective due dates expressed herein.

Unless the Certificate of Authentication hereon has been executed by the Trustee
or a duly appointed Authentication Agent referred to herein, this Note shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.

The Indenture and this Note shall be governed by and construed in accordance
with the laws of the State of New York.

All terms used in this Note which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.

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

                                        DTE ENERGY COMPANY

                                        By: ____________________________________
                                        Name:
                                        Title:

ATTEST:

By: _________________________________
Name:
Title:

                                      A-10

<PAGE>

                          CERTIFICATE OF AUTHENTICATION

     This is one of the Notes of the series of Notes described in the within
mentioned Indenture.

                                        BNY MIDWEST TRUST COMPANY
                                        as Trustee

                                        By: ____________________________________
                                            Authorized Signatory

Date:

                                      A-11

<PAGE>

     FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

     _______________________________________________________________________
     (Please insert Social Security or Other Identifying Number of Assignee)

     _______________________________________________________________________
     (Please print or type name and address, including zip code of assignee)

the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorneys to transfer the within Note on the books of the
Issuer, with full power of substitution in the premises.

Dated: ______________________________

NOTICE: The signature of this assignment must correspond with the name as
written upon the face of the within Note in every particular, without alteration
or enlargement or any change whatever and NOTICE: Signature(s) must be
guaranteed by a financial institution that is a member of the Securities
Transfer Agents Medallion Program ("STAMP"), the Stock Exchange, Inc. Medallion
Signature Program ("MSP"). When assignment is made by a guardian, trustee,
executor or administrator, an officer of a corporation, or anyone in a
representative capacity, proof of his or her authority to act must accompany
this Note.

                                      A-12

<PAGE>

                               [CONVERSION NOTICE

     To convert this Note into Common Stock of the Company, check the box:

     To convert only part of this Note, state the principal amount to be
converted (must be $1,000 or a multiple of $1,000): $__________.

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

                _________________________________________________
                (Insert other person's soc. sec. or tax I.D. no.)

            ________________________________________________________
            (Print or type other person's name, address and zip code)

Your Signature: ________________________ Date: _________________________________
(Sign exactly as your name appears on the other side of this Note

*Signature guaranteed by: ________________________________

By: ________________________________]

----------
*    The Signature must be guaranteed by an institution which is a member of one
     of the following recognized signature guaranty programs: (i) the Securities
     Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange
     Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP);
     or (iv) such other guaranty program acceptable to the Trustee.

                                      A-13

<PAGE>

            [OPTION OF HOLDER TO ELECT PURCHASE ON FUNDAMENTAL CHANGE

     If you want to elect to have this Note purchased, in whole or in part, by
the Company pursuant to Section 801 of the Supplemental Indenture, check the
following box:

     If you want to have only part of this Note purchased by the Company
pursuant to Section 801 of the Supplemental Indenture, state the principal
amount you want to be purchased (must be $1,000 or a multiple of $1,000):
$___________.

**Signature guaranteed by: ________________________________

By: ________________________________]

----------
**   The Signature must be guaranteed by an institution which is a member of one
     of the following recognized signature guaranty programs: (i) the Securities
     Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange
     Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP);
     or (iv) such other guaranty acceptable to the Trustee.

                                      A-14

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